Amy K. Webster (Webster, CRD#3137487), a former Wells Fargo stockbroker and investment adviser, prevailed recently against her former employer in a U5 defamation proceeding. The matter underscores the potential effectiveness of challenging false or defamatory employment records through FINRA arbitration.

A financial advisor’s employment history, recorded within the Central Registration Depository (CRD), is largely treated as publicly available information and can be accessed, in part, through FINRA BrokerCheck. Information recorded within the CRD program includes any information set forth on a Form U5 (Uniform Termination Notice for Securities Industry Registration). Essentially, a U5 follows a financial advisor from firm to firm—and if it contains incorrect or misleading information—such instances of “U5 defamation” can have serious ramifications including lost job opportunities. Therefore, it is critical that the information’s accuracy be evaluated and, where necessary and appropriate, challenged through a FINRA arbitration proceeding seeking expungement.

In the matter at hand, a FINRA arbitrator ruled in favor of Ms. Webster’s request for expungement, and additionally, ordered Wells Fargo to pay $30,000 in attorneys’ fees. Ms. Webster, who has more than two decades of experience in the securities industry, sought expungement of misleading information on her U5 following her March 2020 termination by Wells Fargo for alleged improper sales of insurance products. However, through the FINRA arbitration process, Ms. Webster successfully convinced an arbitrator that Wells Fargo had defamed her by improperly recording purported violations of firm policies and procedures on her U5.

Ms. Webster was a senior wealth management private banker with 12 years of experience at Wells Fargo. Her termination stemmed from complaints received from two bank customers who claimed they were “enrolled in renter’s insurance policies for which the banker received sales credit without the customers’ authorization.” However, during the course of discovery, it became apparent that Ms. Webster was not the agent of record, and aside from a customary internal referral credit, she received no compensation in connection with the insurance transactions at issue.

In recent years, Wells Fargo has weathered several notable regulatory enforcement issues. As recently as 2018, the firm paid $575 million to state attorneys general related to alleged openings of unauthorized accounts including enrollment of customers in third-party renter’s and life insurance policies. And in 2016, Wells Fargo reached a well-publicized $185 million settlement involving alleged openings of unauthorized bank accounts.

A Form U5 disclosure is required whenever a person registered with a broker-dealer or a registered investment adviser (RIA) terminates his or her employment with a particular firm. The form is filed within 30 days of the employee leaving the firm and, further, it discloses the reason for the departure—whether it was voluntary or involuntary or if some other reason existed. The U5 will contain certain information such as if the advisor left the firm because of an industry rule or firm policy violation, which are serious disclosures that can immediately impact one’s ability to find new employment. Moreover, the information contained in a Form U5 may become of interest to FINRA or a state securities regulator, potentially subjecting the advisor to an investigation and possibly an enforcement action.

The attorneys at Giarrusso Law Group LLC have significant experience in handling U5 expungement and defamation claims on behalf of financial advisors. We are adept at guiding securities industry professionals through the expungement process, from initial analysis of an advisor’s employment history and records through assessing, where appropriate, prosecuting a claim. Advisors who wish to discuss a potential claim may contact us at (201) 771-1115 or info@gialawgroup.com for a no-cost, confidential consultation.