What Is The Process For Expunging My U5?
Really, the first step, the second you’re terminated, is to call a lawyer. Better yet, as you feel the water get warmer (insert boiling frog joke here) you should talk over your options for an exit strategy with a lawyer. Whatever your sense of timing, you want a lawyer to get in front of the problem right away, possibly stopping defamation on your U5 in the first place by contacting your firm’s internal counsel and dissuading them from filing something that will end your career. Most firms are willing to talk, though everybody says, “We don’t negotiate on the U5.” Bullshit, they don’t! In many cases, they are self-aware about their interest in avoiding unnecessary litigation and want to be compliant with FINRA U5-related Rules and standards of conduct. I only know of a few firms that refuse to talk, like ever. They will remain nameless, as cults are litigious, but I’m sure many of you brokers out there know who I’m talking about. Them.
If this doesn’t work out, and they mark up your U5, you’ll have to take the dispute over your U5 to FINRA arbitration. The process usually takes about a year or so. These are the steps:
1. Filing your Statement of Claim: The Statement of Claim explains why the language on your U5 may be defamatory. It spells out the relief you seek, specifically the expungement of the defamatory language on your U5, and may request monetary damages. Since we don’t usually know the full extent of damages at this point, we put “unspecified,” which also gives you the lowest filing fee of $2,000.00 at FINRA Dispute Resolution. Usually takes about 4 hours, give or take. I will ask you for a narrative to give me relevant facts and speed up the process.
2. Service of Process: You don’t need a process server; FINRA automatically serves the firm.
3. Filing an Answer: The firm is required to file an Answer to your Statement of Claim, responding to your allegations within 45-60 days, depending on whether they get an extension to file.
4. Arbitrator Selection: Usually, there are three arbitrators, and 10 candidates per spot. We are allowed to strike 4 of any set of 10 for any reason, and must rank the remaining 6. The process can take upwards of 8 hours, as there is a lot of information on these people provided to us by FINRA, including voting records in previous arbitrations, training histories as arbitrators, career histories, personal statements, and the like, and I call other lawyers who have been in front of them to see what they’re like up close, not just on paper. Good arbitrator selection means a lot in terms of your overall possibility of success expunging your U5. It’s the DNA of your success or failure.
5. Discovery: The parties will exchange relevant documents and information after the panel is selected. We will ask your former firm for your employment agreements, performance reviews, firm policies and procedures, emails, texts, and other relevant documents and information related to your termination and why it happened, according to your former employer. Often there is no investigative file, or they gin one up. Either way, we will work to make the most of what we obtain. Each time a party makes requests from the other, they have 60 days to respond. You can make multiple sets of requests over the course of several months.
6. Motions: Generally, we may have to file what is known as a “Motion to Compel,” if the other side is not producing documents that we should be entitled to. They have 10 days to respond, and we have 5 days to rebut their bullshit. The arbitration panel will referee this process with a discovery hearing to resolve such outstanding disputes. Such hearings usually take place by Zoom.
The overall discovery process usually takes about 10-20 hours, depending on the complexity of your case.
7. Final Evidentiary Hearings: This is a trial before the arbitration panel, usually taking about 3-5 days, and generally conducted in person, unless the parties mutually agree to conduct the hearings by Zoom. Each side presents its evidence, call witnesses (including you the Claimant, and witnesses you and your former firm selects), and make final arguments. I will present your case, ask you questions on direct examination, and question the Respondent’s witnesses on cross examination. The panel may participate to a certain extent, asking each party and their witnesses questions of its own.
Figure about 10 hours of attorney time per day to try your case to an Award.
8. Arbitration Award: Within 30 days of the close of evidentiary hearings, the arbitration panel will issue a written Award. It will state their decision, whether they grant or deny your request for U5 expungement. If you win, the Award will state what language is to be removed or modified on your U5. Panels usually only issue what is known as an “explained decision,” meaning, one that spells out the reasoning for their final verdict, if both parties agree to one 20 days before the evidentiary hearings begin. Usually, neither party wants one, as it gives the other more of chance to vacate an arbitration award if it is dissatisfied with the result. I’ll get to that below.
9. Confirmation of the Award (if necessary): Generally, if the Panel makes a finding that the language your old firm put on your U5 is defamatory in nature, the change to your U5 may be automatic. Otherwise, without such language in the Award, you may have to go before “any court of competent jurisdiction” in a short hearing to confirm the Award before taking it back to FINRA to have your record repair completed. We usually engage local counsel in our network for that last simple step, which can take a matter of minutes.
10. Petition to Vacate: Generally, there are no appeals in FINRA arbitration. If the Panel makes a decision based on what can be deemed “manifest disregard of the law,” however, or other reasons listed in the Federal Arbitration Act or equivalent state statutes, including but not limited to bias or corruption, or fraud, you may have an opportunity to attack a bad award and renew the process with a different panel. This happens very rarely, but it is an option.
For more information, and to discuss your potential case, email [email protected] or call The Law Offices of Christopher H. Tovar PLLC at (832) 370-3908. Call me. I’ll repeat all this stuff to you, throwing in a few boiling frog jokes you haven’t heard yet, and you’ll know you found the guy. Dude, I’m The U5 Guy™!
