Coastal States Erode Brokers' U-5 Rights

Support our Petition to the NASD Asking for a Uniformed "Qualified" Standard

April xx, 2007

Ms. Mary L. Schapiro
Chairman and CEO
National Association of Securities Dealers, Inc.
1735 K Street, NW
Washington DC, 20006

Dear Ms. Schapiro:

The New York Court of Appeals recently gave securities industry employees a most unjust blow when it stripped brokers of legal recourse in the event that a former employer disclosed false and defamatory information on an employee's Form U-5. Under almost any other scenario, such illicit behavior is called "defamation" and would be considered grounds for the court system's involvement.

Nearly 10 years ago, a rule was proposed that would have set an industrywide standard that secured employees' rights to legally challenge false and defamatory U-5 disclosures by a former employer. Regrettably, that proposal, SEC Rule 1150, has since fallen by the wayside. Currently, only two states -- California and now New York -- grant employers an "absolute" (rather than "qualified") privilege with respect to U-5s. I strongly encourage the NASD to revive and adopt that 1998 proposal before other states follow their injudicious lead.

Conflicting state-to-state standards benefit nobody, especially in the instance where an honest, ethical broker has been undeservedly maligned by a spiteful former employer who resents the employee's departure. Not only does that employee pay the cost of an unduly tarnished U-5 in terms of a sullied reputation and diminished future career opportunities, but the brokerage firms and investors that would have otherwise possibly benefited from his or her investment expertise, professional acumen, and ethical and loyal service also lose out when they refrain from doing business with him or her because of the erroneous, unchallenged information they read.

Legal channels must remain open via a nationwide standard of "qualified" privilege so that these mistreated securities industry professionals have an opportunity to salvage their careers and rightfully restore their professional reputations. Brokers' rights to legal recourse are simply far too vulnerable under current state-by-state standards.

Sincerely,

The Undersigned

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