SIA Faults NASD Regulations Proposal on Form U-5s

The Securities Industry Association has criticized a recently proposed rule by NASD Regulation that would provide NASD members with "qualified immunity" in arbitration proceedings for statements made in good faith on Form U-5, on which a firm is required to file its reasons for termination of a broker.

The SIA has identified the immunity issue as one of its top priorities, and has long pressed the NASD for greater protection for candid statements firms make on U-5s. The trade group says, however, that the current proposal "falls short of what is needed to fix the problem," according to SIA senior v.p. and general counsel Stuart Kaswell.

Form U-4 and U-5 disclosures concerning an employee's employment and disciplinary history are contained in the NASD's Central Registration Depository, which is currently undergoing a redesign. When the long-awaited CRD redesign is completed, the disclosures will become far more visible- insofar as investors and brokerage firms will be able to access them over the Internet. There will also be Web-based form filing.

The SIA's Kaswell noted that the current litigation threat "makes it harder for a firm to completely explain serious regulatory misconduct that caused a broker's termination."

Karen O'Brien, general counsel for the North American Securities Administrators Association, the group of state securities regulators that co-owns the redesigned CRD with the NASD, last week said NASAA endorsed the NASD proposal in general, but still was reserving judgment on its specifics.