FINRA Arbitrators Rewrite Mutual of Omaha Form U5 Termination Comment

January 5, 2017

Today's Blog is short (if not sweet) and, hopefully, to the point. We consider yet another Wall Street employment dispute that winds up as an intra-industry arbitration at FINRA. In the end, we have two of three respondents dismissed and a proposed revision to a Form U5. 

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2015, Claimant Potts, appearing pro se, asserted that he had been wrongfully terminated and sought $600,000 for four-years of allegedly lost income; $250,000 for the alleged hardship he suffered since his 2012 termination, and $300,000 in punitive damages. At the close of the hearing, Claimant also requested the expungement of his Central Registration Depository records ("CRD"). In the Matter of the FINRA Arbitration Between Royce H Potts, IV, Claimant, vs. Mutual of Omaha Investor Services, Inc., David Wayne Caccamo, and Charles Cornel Gaillard, Jr., Respondents (FINRA Arbitration 15-02956, December 28, 2016).

Respondents generally denied the allegations made in the Statement of Claim and asserted various affirmative defenses.

Two Down

On or about May 13, 2016, Respondents Gaillard and Caccamo filed a joint Motion to Dismiss, which Claimant Potts opposed. On July 21, 2016, the Panel granted the Motion to Dismiss as to:

  • Respondent Gaillard on the grounds that his involvement falls within the scope of his employment, and, accordingly, that there is no basis for holding him personally liable; and 
  • Respondent Caccamo on the grounds that he is not associated with the conduct at issue and that his status as new district manager in Claimant's prior office does not give rise to potential liability.


The FINRA Arbitration Panel denied Claimant Potts's request for damages but granted his request for expungement. As set forth in pertinent part in the FINRA Arbitration Decision:

[T]he Reason for Termination should be changed to "Other". The Termination comment should be changed to "Terminated because no longer an agent of Mutual of Omaha Insurance Company, which is a requirement to be employed by Mutual of Omaha Investor Services, Inc."

Bill Singer's Comment

I absolutely LOVE the proposed revision of the Termination Comment on the Uniform Termination Notice for Securities Industry Registration ("Form U5"). Compliments to the arbitrators for their award. 

Claimant Potts was apparently employed by both Mutual of Omaha Insurance Company and Mutual of Omaha Investor Services, Inc. As disclosed in FINRA's list of its member firms over which it has jurisdiction, although the investor services company is subject to the self-regulator's jurisdiction,  the insurance company is NOT a FINRA member firm. Accordingly, if the insurance entity fired Potts, that entity cannot file a Form U5

In far too many Forms U5, we see gory (and at times, defamatory) commentary about the reasons for termination of individuals who are employed among a FINRA-member-firm and its non-member affiliates. In many such instances, the nonmember's termination of the employee did NOT arise because of any misconduct that occurred at or on behalf of the FINRA member firm; however, the member firm often files a Form U5 that typically adopts and discloses the allegations/assertions made by the non-FINRA-member-firm-affiliate. 

In Potts v. Mutual of Omaha, the FINRA Arbitration Decision does not state the reasons for Potts' termination by Mutual of Omaha Insurance Company -- and I applaud that omission under the circumstances in this case.  As such, let's just say that Potts did "X" at Mutual of Omaha Insurance.  When Potts did "X," we may reasonably infer from the Decision that said conduct did not occur at FINRA member firm Mutual of Omaha Investor Services. FINRA member firm Mutual of Omaha Investor Services apparently fired Potts only because he was no longer able to serve as an agent of the non-member insurance affiliate. Accordingly, there would not seem to be any regulatory reason to disclose "X" on Potts' Form U5. 

Are there circumstances when a FINRA member firm should and/or is compelled to disclose on a Form U5 the reason for termination made by a non-member-firm affiliate? Yes, but such circumstances do not arise anywhere near as frequently as the volume of such disclosures. The fact that a FINRA member firm registered representative told a Vice President of an affiliate bank to go to hell or a registered representative refused to relocate to another office of a insurance affiliate does not, in and of itself, give rise to a "reason" for that rep's termination by the FINRA member firm. In reality, the "reason" for the member firm termination is as expressed in Potts v. Mutual of Omaha: the FINRA member firm requires that its rep also be an agent or employee of an affiliate.