According to Lax, Finra arbitrators so far have agreed that one cannot be told to voluntarily resign. He added that he has represented roughly 25 advisors in these arbitrations and has won every time.

A Long Wait

For Prezzano and company, their win came just this last December, six years after they last worked for Credit Suisse. The monetary award included $5.16 million in damages, 10% interest annually going back to their November 2015 departures, $86,367 in costs, and $1.15 million in attorneys’ fees. They also won expungement of the reasons for termination and the termination explanation on their U5s. (The reason was changed to “other” and the explanation changed to “other—termination without cause.”) In addition, the total $121,725 in Finra hearing session fees was assigned to Credit Suisse. The total bill roughly tallied to $9.5 million.

Luckily for all of Lax’s seven clients, they were able to move on, and pretty quickly. Prezzano, Bosley, Jaeggi, Lendi, Miller and Wacker went to UBS Financial Services on the West Coast within a month, according to BrokerCheck. Soja joined First Republic Securities Co. in San Francisco. They found their next step easily, because as wrong as the U5 declaration was, it wasn’t damaging, and their BrokerCheck record remained unblemished.

“But if you’re talking about a damaging disclosure, that’s when this gets very, very complicated for the advisor,” Lax said. “Let’s assume the disclosure is false. Let’s say a bad actor firm put something negative in the disclosure because it wanted to keep the book of business. That’s a significant amount of power. And there’s the Finra process, which is a year, or a year and a half. While that disclosure is there, it can be very difficult for the advisor to get a job. You have to just hope that someone believes you.”

Not all firms will go all out to win their case. There are plenty of occasions where a firm stands by its U5 at first, only to disappear, ignoring future filing dates and requests to appear. In this case, it might be easy to deduce the U5 was a last slap at brokers on their way out the door. But even if the firms don’t show up to the arbitration, the broker has had to jump through the hoops anyway, the same way a driver would have to show up in traffic court whether or not the cop issuing the ticket shows up too.

“Sometimes [the firms] do care, very much. But sometimes they don’t,” Lax said. “These wins are unopposed. And that’s a problem. An arbitrator is supposed to gather evidence and hear the reasons for the U5 disclosure. If it’s unopposed, they can’t do that.”

The panel can expunge the record, but there’s no satisfying day in court for the broker and no public accountability for the firm, even though the broker has endured a significant amount of time and anxiety. A random search on the Finra site suggests resolutions can take seven months to a year and a half.

“You shouldn’t be able to destroy people’s careers like that,” Landsman said. “That’s the scenario I keep seeing. There’s bad wrongdoing that exists. I know that. I rep investors, too. And wrongdoers should be punished. But terminating someone for misconduct has a major impact on the careers of people in their 30s or 40s, and they can suffer for the rest of their lives, even if it’s an honest mistake. How do they provide for their family, or build a career?”

He related a cautionary tale about a client of his, a registered representative who resigned from one firm on one day and started with his new firm the following day. The rep, Landsman said, had a spotless record … that is until, by coincidence, a customer complaint was filed on the rep’s last day at his prior firm.