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Wednesday, October 04, 2006

Broker Defamation on Form U-5

Many Wall Street firms are engaging in an unlawful practice of filing false and defamatory Form U-5s for their departing broker and trader employees in order to "blackball" the employee from the Securities Industry. A terminated broker or trader may have a valid legal claim against their former employer for U-5 defamation. Such employees can bring their claims in arbitration for U-5 defamation and seek compensatory and punitive damages and an order from an arbitration panel ordering expungement of false and defamatory language from the employee's Form U-5.

Where a brokerage firm files a Form U-5 which contains false and defamatory language about the reason for an employee's termination or resignation, they have violated the employee's legal rights by not accurately disclosing the circumstances for the termination. Brokers bringing Form U-5 defamation claims need to establish in arbitration that the reason given by the firm for the termination (and the employee's conduct leading up to the termination) differs significantly from what actually occurred.

Often employers file false and defamatory Form U-5s against their employees in order to punish them for leaving the firm, to cover up for senior managements missteps or to hinder the ability of a former broker or trader who seeks to compete at a new firm. Where such evidence of "malice" or bad intent can be established, an employee is likely to prevail in arbitration on a claim for Form U-5 defamation.

Arbitration is the most effective and efficient means for a broker or trader to recoup back salary and bonuses, compensatory damages, a clean slate and a clear conscience.


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