U5 bias by NASD?Bullbear's question

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Sep 19, 2006 8:31 am

Poster Bullbear asked on another topic in this forum what his/her recourse was against a firm which allegedly filed a false U5 indicating "poor performance" as the reason for termination.  That post raised an interesting question as to why the NASD so quickly sanctions individual RRs for filing all sorts of false documents but rarely investigates and sanctions BDs for the same misconduct.  NASD is quick to sanction firms for failing to timely amend U4/U5s, but we never see cases in which RRs are victimized by false filings and NASD regulatory staff does something.  Sadly, RRs are left to the expensive alternative of pursuing individual arbitrations --- and, as we know, most firms will be immune from defamation claims on U5s, so the only viable option in such an arbitration is to seek an order amending the disclosure.


Consider this 2006 NASD case that is posted on my website (and you will find many other similar examples in 2006 and prior years) at http://rrbdlaw.com/RegulatoryLinks/CASESOFNOTE/NASD/2006.htm : 


Joseph Paul Guasconi <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


OS/E9B2004037702/January 2006


Guasconi provided false information concerning a customer’s brokerage account to another financial institution. Joseph Paul Guasconi: Fined $10,000; Suspended 7 months in all capacities


Bill Singer's Comment:  If you check RRBDLAW.com's many years of regulatory reports, you will see a number of cases where RRs are sanctioned for falsely representing all sorts of things about clients: account values, real estate holdings, employment status, and so on.  I'm sure that many of this misrepresentations were motivated by what seemed to be noble, if not savvy, motives.  Help out a friend.  Get in good with a client.  Alas, the road to Hell is paved with good intentions.  Moreover, with all the focus today on deceptive practices involving banking/brokerage accounts, there isn't much to be said in favor of a little white lie as a means of client development.


The question I ask is simple:  Why won't the NASD seriously investigate and prosecute allegations from associated persons in which they allege that member firms are "trashing" their U5s with misleading and false statements as to termination?  Deception is still deception.  It's about time that NASD balanced the books here and raised its consciousness on the issue.  It's just not right for the regulator to look the other way when misconduct occurs.  Individual RRs can ill afford the costs of filing their own arbitration complaints against their former employers as a form of alternative regulation.  NASD needs to do its job here for all components of the industry -- not just the member firm.

Sep 19, 2006 9:02 am

The NASD and SEC are currently doing just that as of several weeks ago with respect to a civil suit in Texas (former BM litigating a broker-dealer).


I can't provide details since this is an "investigation" in progress.

Sep 19, 2006 9:05 am

Management up and down the food chain has been "educated" as to the importance of ensuring that what is reflected on the U-5 is accurate.


There is no need to engage attorneys to deal with the truth.  If you were fired for poor performance most managers will indicate that you voluntarily resigned.  They, the managers, have no vested interest in screwing with the rest of your life.


Mr. Singer is trying to get his FIA group going and is inventing things to worry about so that he can fix problems that don't exist.


If you leave a B/D they are to file your U-5 withing thirty days.  You are not on out of line asking what will be put on it--and talking about it right then and there if it's negative.


I think the line, "I can appreciate that you don't want to ever hire me again, but do you really want to screw me up for the rest of my life?"


Your manager will tell you, "OK, I'm going to indicate that you voluntarily resigned and I would rehire you....but don't dare apply here again."


You can stand up, stick your hand out and say, "Thanks.   I appreciate the chance to work here, I wish I had done a better job, and I wish you good luck."


He or she will say, "Same to you," and you can move on to the next chapter of your life.


You need an organization like FIA like you need a cold sore.  What they're trying to do is lure individual brokers into making $50 "donations" and they're going to use your money to elect chop shop executives to the NASD.


That is not in your best interest.  You dont' want the NASD rules to be rolled back, you want them to be made more difficult to circumvent.


Don't make it even easier for the bad guys to be able to ruin your reputation by being able to say, "Our CEO is on the NASD District Boar of Governors."

Sep 19, 2006 9:15 am

I know of another situation where a broker was told to leave and his U-5 said RESIGNED. The firm who terminated him had AMPLE basis and that broker's very fortunate the SEC/NASD did not get involved. He was employed at some bucket shop/boiler room/chop shop last I checked....good place for him.



Sep 19, 2006 10:49 am
ymh_ymh_ymh:

I know of another situation where a broker was told to leave and his U-5 said RESIGNED. The firm who terminated him had AMPLE basis and that broker's very fortunate the SEC/NASD did not get involved. He was employed at some bucket shop/boiler room/chop shop last I checked....good place for him.



The reality is that that is what most U-5s say because of the threat from lawyers to drag things out to the tune of thousands of dollars in wasted time and expenses.


Honest brokers do not need lawyers to make threats and the system needs to be strengthend, rather than weakend, to make it difficult for the creeps to stay in the business.


If a lawyer told a creep broker, "I'll try to get your U-5 changed, but if I can't the NASD is going to cloud your license with a $10,000 frivilous arbitration claim" I think a lot of them would have to take up chasing ambulances instead.


And that would be good.

Oct 1, 2006 12:41 am

It took them 1 year to mail me a U5 even though I requested it tons of times.

Oct 5, 2006 7:14 am

Who was the broker-dealer? It shouldn't have taken that long and I would like to report them to the NASD.