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What is FINRA Form U5?

As an informed investor, you shouldn’t hesitate to check out a current or potential broker’s track record, which is available through their BrokerCheck report, a free online service offered by FINRA, the Financial Industry Regulatory Authority. FINRA also keeps brokers accountable through the Form U5, otherwise known as the Uniform Termination Notice for Securities Industry Regulation, which documents if a broker left a firm of his own volition or was dismissed.

Whenever a broker leaves a firm, their firm must file a Form U5 form with FINRA. The Form U5 states why a registered representative stopped working for a certain broker-dealer. While most Form U5s contain routine information, as brokers do tend to move between different firms in the financial services industry, that is not always the case. If the broker was terminated, the Form U5 notes the circumstances surrounding such dismissal. The firm has 30 days after a broker departs to file a Form U5. Brokers can dispute information on Form U5s and attempt to have them expunged, according to InvestmentNews, which writes, “Through [FINRA] arbitration against the [broker-dealer] that published the U5, he can have the U5 completely expunged from the CRD system (including his U4 and BrokerCheck), and he may obtain monetary damages to offset the economic impact the U5 has had upon him.”

If your broker is leaving their current brokerage firm, it is important to stay informed about this new development. Before making any decisions regarding whether to follow your broker to a new broker-dealer, it would be prudent to find out if the broker was terminated.

Unfortunately, investors cannot access Form U5s directly, as the information is stored within FINRA’s internal Central Registration Depository (CRD) database. While this lack of transparency is frustrating, some of the information on the Form U5 is also contained within the broker’s BrokerCheck report. This information can help you determine if a particular investor is the right fit. If they were terminated or “permitted to resign”, that would be a red flag—whether you’re looking for a new broker or considering following your current broker to a new broker-dealer. U5s are continually amended, so a new allegation would appear on the broker’s same U5, not a new one.

It is important to pay attention to the contents of BrokerCheck, as it contains important information about a broker’s relationship with any former employers. This important information can protect you from fraud and ensure that you can continue to exert agency over your financial affairs. If you have any questions about your broker, or need assistance using FINRA’s BrokerCheck tool, contact our office at 212-658-1500 or info@fkesq.com and we would be happy to help.