When a brokerage firm lets a registered representative go, the document that follows them to the next job is the Form U5, the Uniform Termination Notice for Securities Industry Registration. The firm files it, the firm chooses the wording, and every firm that later registers the advisor has to review it.
The form gives the firm five choices for the reason: Discharged, Permitted to Resign, Voluntary, Deceased or Other. If the firm picks Discharged, Permitted to Resign or Other, it must write an explanation. Winthrop & Co., an advisor transition consultancy, has a plain-language rundown of each termination reason and when each one calls for a written explanation. FINRA's by-laws require the firm to file the form within 30 days of the termination and to give the departing advisor a copy.
The reason and the explanation are not what the public sees. BrokerCheck, FINRA's public lookup, does not publish the termination reason or its explanation, but it does publish most of the disclosure answers further down the form. Hiring firms see all of it.
The disclosure that matters most is question 7F. It asks whether the advisor left, voluntarily or not, after allegations that accused them of violating investment-related rules or industry standards of conduct, of fraud or the wrongful taking of property, or of failure to supervise. A yes becomes a termination disclosure on BrokerCheck. The question covers voluntary resignations too, so resigning ahead of a firing does not avoid it once allegations have been made.
A separate question asks whether the advisor is, or was at termination, under internal review for fraud, wrongful taking of property or violating investment-related rules. If the answer is yes, the advisor may send FINRA their own summary of the event, up to 4,000 characters, through the firm or by mail.
The form can also change after the advisor is gone. Firms must amend a U5 when the information on it becomes inaccurate or incomplete, for example when a customer complaint or a regulatory inquiry surfaces later.
Advisors who believe the language on their U5 is false can bring a claim against the firm in FINRA arbitration, where disputes between firms and their registered people generally have to go under Rule 13200. How far firms are protected depends on the state. New York's highest court ruled in 2007, in Rosenberg v. MetLife, that statements on a U5 are absolutely privileged against defamation claims, while many other states give firms a qualified privilege that can be lost if the statement was made with malice.
The registration clock starts on the termination date. Under FINRA Rule 1210, an advisor who goes two years without being registered generally has to pass the qualification exams again. FINRA's Maintaining Qualifications Program, in Rule 1240, extends that to five years for people who were registered in the category for at least a year, elect the program when the U5 is filed or within two years after, and finish continuing education by Dec. 31 each year.
Money can come due as well. Recruiting packages are usually paid as forgivable loans, promissory notes the firm forgives a slice at a time while the advisor stays. Winthrop says in its guide to what happens when you leave before a forgivable loan is forgiven that "termination for cause almost always accelerates the balance," while notes differ on termination without cause: some accelerate, some forgive the rest and some say nothing. The same guide says the next firm's package is usually sized to retire the balance.
Winthrop's free guide, What Are Your Options After a Termination?, gives two reasons to move quickly. The former firm reassigns the advisor's clients, and the new advisor starts calling them. And the two-year exam clock is already running. The guide recommends speaking with securities employment counsel before signing anything.
Advisors can see what the public sees by looking themselves up on BrokerCheck and comparing it with their copy of the U5. Winthrop & Co.'s guide to hiring a lawyer for a Form U5 says the best time to call one is before the firm files.