Firms historically tended to protect their own, but these days they are more likely to err on the conservative side and set an advisor free. Let's not debate the merits of today's higher standards, but instead discuss what one should do if one is fired.
Understand that the chances of being terminated have increased from a remote possibility to a harsh reality. As such, it makes sense to have a well thought out game plan in case the unthinkable occurs. The first thing to remember is to avoid knee jerk reactions and have a tactical approach.
One's first post-termination instinct is to call the host of managers who have been aggressively recruiting you. They all would like to hire you, and will be happy to meet with you. Your termination is great gossip, and inquiring minds want to know!
You soon learn, however, that most firms cannot bring you aboard until they have seen the language on your form U5 and it has been reviewed and approved by their compliance departments. As it turns out, this U5 language which is filed by your old firm is a vital piece of information. The U5 is the document that a firm sends to FINRA and its contents are then recorded on your U4 or permanent FINRA record. What is written on your U5 will have a lot to do with who, if anyone, will employ you in the future.
So rather than meeting with your friendly local managers, the first order of business is to secure a knowledgeable attorney to help negotiate this important U5 language. You may be inclined to seek out a prominent employment attorney, but that most often is the wrong option. A terminated advisor is better represented by a lawyer well-versed in securities law. It is best to find one who has successfully worked with your former firm's legal and compliance departments. Most of the employment specialists we have dealt with have no experience negotiating U5 language and don't know what to ask for or accept.
Your former firm must classify your departure in one of three categories. If they decide to describe the parting as "voluntary" you will be in the best possible negotiating position. Basically "no harm, no foul." The firm may elect to color your separation as "permitted to resign." No one can give an absolute definition of what that means, but it is generally understood to be code for a minor offense. Because firms in today's environment feel the need for more complete disclosure, this category has become virtually a thing of the past. Finally, the harshest category "terminated," is the most frequently used these days to describe a separation. With a termination classification, firms are required to list the reason(s) for their action, and this becomes your U5 language.
Many fired advisors think they have a meaningful wrongful termination case against their previous firms, but that is usually not the best course of action. It takes many months before such a claim makes its way to arbitration, and by then most advisors we have assisted have found new firms and are thriving. If your career seems back on track, arbitration panels are unlikely to find in your favor. Because of that, we typically urge fired advisors to hire a securities law expert and focus on getting the best possible U5 language.
Most top tier firms cannot make a hiring decision without the U5 disclosure, and unfortunately your former firm has up to 30 days to make that filling. If you choose to negotiate prior to disclosure, it can be difficult to explain precisely why you were let go. The negotiated explanation often tells a different story than the reasons your former manager or compliance officer gave you on your way out the door. So sometimes the early interview results in an explanation that conflicts with the official report. Such conflicts hurt credibility and are detrimental to a potential deal. So what are the best practices during the waiting period?
First and foremost, talk to your clients. They are likely being solicited by your former colleagues, and you need to stay involved and let them know your situation. If the advisors who have been assigned your accounts are making slanderous comments about you and your separation, relay that information to your lawyer and let him communicate with your former firm. Don't make the mistake of calling those advisors or your former manager. Your lawyer may be able to use this information to help negotiations, but your involvement could well turn emotional and detrimental.
