FINRA Arbitration Panel Orders J.P. Morgan to Amend Form U-5, Flags Potential Pattern of Conduct
From the desk of Jim Eccleston at Eccleston Law
A Financial Industry Regulatory Authority (FINRA) arbitration panel recently issued an unusually detailed decision in a dispute between J.P. Morgan Securities and former advisor Joshua David Sappi Biering, shedding rare light on how a firm may deploy - and sometimes abuse - the Form U-5 during advisor departures.
FINRA panels typically provide little insight beyond the award itself. Here, however, the panel offered an explanation “for the parties’ information only,” citing concern that J.P. Morgan’s actions could reflect a broader pattern of conduct, according to Financial Advisor News.
Biering worked for J.P. Morgan’s brokerage unit in Fort Worth, Texas, from 2017 through 2023, first as a broker and later as a dually registered advisor. In June 2024, he filed a statement of claim alleging that J.P. Morgan mishandled his Form U5 after his departure. His claims included defamation, wrongful discharge, weaponization of the Form U5, breach of contract, illegal forfeiture of earned compensation, forfeiture of deferred compensation in violation of ERISA, and violations of Texas and New York labor and wage laws. Financial Advisor News reports that he sought at least $10 million in damages and expungement. J.P. Morgan denied all allegations and asked the panel to assess all arbitration costs against Biering.
Financial Advisor News reports that the panel rejected every claim except expungement. On that issue, the panel ordered J.P. Morgan to amend Biering’s Form U-5 to reflect a “voluntary” termination and to leave the termination explanation blank.
In its explanation, the panel stated that J.P. Morgan appeared to have learned that Biering was considering leaving the firm and then “began investigating reasons to terminate so as to make it more difficult for him to work with a competitor.” The panel further noted that, based on testimony and references to prior findings against the firm, it worried this conduct may represent a recurring practice, as reported by Financial Advisor News.
J.P. Morgan placed Biering on administrative leave on October 27, 2023, without providing a reason. Biering resigned the following day. Pursuant to the firm’s employment agreement with advisors, the firm seeks to impose a 60-day notice or “garden leave” period after resignation, unless the firm terminates the advisor earlier. During that period, the firm argues that the advisor cannot engage in registrable business activities.
On December 1, 2023, J.P. Morgan terminated Biering for an alleged violation of its code of conduct. On December 22, the firm filed a Form U-5 stating that it discharged him because, after resigning but before the notice period ended, he allegedly engaged in inappropriate conduct unrelated to securities sales or customer complaints.
The panel concluded that the timing of the Form U-5 filing primarily aimed to hinder Biering’s ability to transfer his book of business to a competitor. Although the panel did not find the stated termination reasons defamatory, it did find them inaccurate based on the record.
Despite recognizing that a defamatory Form U-5 severely can impair an advisor’s ability to transition to a reputable firm, the panel declined to award damages. According to Financial Advisor News, the panel emphasized that Biering secured lucrative employment with a highly respected national brokerage firm less than two months after his termination.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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