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For Example, Carney Would Be Very Upset To Hear We Told You He Once Entered A Vanilla Ice Look-a-Like Contest And Won

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We’ve all got skeletons in our closets. Drug problems. Quickie marriages in Vegas over spring break. That truly heinous angora sweater we paid far too much for back in ’03, and those stiletto boots that required the assistance of two people to get on and off, that we couldn’t walk more than two blocks in and that made us look like Commie assassins on assignment (this is Carney, btw). Luckily, though, no one’s keeping tabs of our mistakes, or so we assume (save for our mother, who reminds us daily “We don’t want to have another incident like Angora of ’03, do we?” And though it’s true—we don’t—the constant reminder of dark things in our past really gets in our craw). Some Wall Street employees, however, are not so lucky, thanks to something known as the ‘U5’ form.
Every time a broker, trader or I-banker leaves his/her firm, the employer must file the U-5 to the NASD, detailing the reasons for the departure. The information is then reviewed and entered into a database for all prospective employers to see, as a background check. Once the form has been submitted, it is difficult to impossible to challenge what’s been said by the former employer. Several courts in New York, the Wall Street Journal reports, have ruled that “information on U5 forms is completely immune to libel claims via an ‘absolute privilege’,” which is unfortunate for people like Joseph Esposito, who Wachovia Securities told regulators in 2003 it had fired for “improperly recruiting customers before joining the brokerage firm,” which is an interesting claim, considering the fact that Esposito had never actually worked at Wachovia. It then took Esposito four years (and a nice chunk of change) to get Wachovia to amend the accusation and say the filing of the form had been their mistake.
Many brokerage firms argue in favor of the U5’s protection because they want an “unvarnished account of an employee’s departure without fear of a lawsuit.” Employees, on the other hand, disagree, saying that firms can and will “knowingly put false information on the form, either to derail the career of a potential competitor or to deflect attention during an investigation.”
This month, the New York Court of Appeals will be hearing arguments on whether or not prior rulings should be overturned to facilitate brokers in arguing what employers can say about them. (Carney will be sitting in, just in case he decides to jump into a little I-banking after the ole leg is healed. Wouldn’t want anyone to find out about that time in the Czech Republic with Jeff Epstein and—ah, actually, we can’t really get into all of this right now. Feel free to IM after 1 for more details, though).
Some Brokers Can't Flee Past [WSJ]