Brief Fact Summary. A brokerage firm, Prudential Securities, Inc. (Prudential) (Defendant), was accused of amending forms to be filed with the National Association of Securities Dealers (NASD) by Andrews (Plaintiff), Meehan (Plaintiff), and Stout (Plaintiff), all former broker-employees (Plaintiff), claiming the forms were amended in a way that was defamatory towards them.
Synopsis of Rule of Law. A complete defense to purportedly defamatory statements made in a Uniform Notice of Termination for Securities Industry Registration (Form U-5) is truth. Form U-5 is to be filed with the NASD by brokerage firms that believe they have information involving past employees that needs to be disclosed on said form.Â
The law intervenes only where the distress inflicted is so severe that no reasonable man could be expected to endure it.
View Full Point of LawIssue. Is a complete defense to purportedly defamatory statements made in a Uniform Notice of Termination for Securities Industry Registration (Form U-5), to be filed with the NASD by brokerage firms that believe they have information involving past employees that needs to be disclosed on said form, is truth?
Held. (Kennedy, J.) Yes. A complete defense to purportedly defamatory statements made in a Uniform Notice of Termination for Securities Industry Registration (Form U-5) is truth. Form U-5 is to be filed with the NASD by brokerage firms that believe they have information involving past employees that needs to be disclosed on said form. A plaintiff must prove four components to maintain a defamation action under state law: (1) a defamatory and false statement regarding the plaintiff; (2) fault equaling at least negligence on the publisher’s behalf; (3) an underprivileged publication to a third party; (4) defamation per se or special harm caused by the publication. A complete defense to defamation is truth and in this case, Andrews, Meehan and Stout failed to offer evidence that the U-5 forms that Prudential submitted were false. They failed to contest that they were brokers of record when the limited partnerships were bought; failed to contest that the stated allegations were made by their customers; nor did they allege that the amounts of actual losses or settlements were incorrect, so no defamatory statement was ever spoken and no statement included in any of the U-5 forms was false.So, the granting of summary judgement to Prudential by the district court was correct. The plaintiff’s argument that Prudential defamed them by indicating that their allegations were consumer-initiated complaints (the idea that the allegations were made not by consumers, but as a result of Prudential’s solicitation) was also rejected. A constricted interpretation like “consumer-initiated complaint†is unnecessary, seeing that many of the consumer claims included information that the brokers may have participated in misrepresentation and the NASD’s purpose of the U-5 form-filing rule by enlightening NASD of behavior it is made aware of was furthered by Prudential. Following the SEC investigation and general solicitation by Prudential made the complaints no less consumer-initiated; so Prudential (the NASD member here) needed to report a broker whom had a complaint filed against him, regardless that the complaint was also against the brokerage firm and was created to respond to solicitation caused by litigation against the brokerage firm. The process by which Prudential was made aware of the plaintiff’s conduct was explained in the U-5 so Prudential could answer in the affirmative to Item 13 without being deceitful, and the plaintiffs could not show that the forms statements were false. Affirmed.
Discussion. Currently, there is no state with an absolute immunity provision for statements made on Form U-5 in its securities statute; however, as witnessed here, no state has rejected immunity in this context by judicial decision (it is of note that several states have adopted qualified immunity by judicial decision). Agents who have been the subject of a U-5 form are permitted response to adverse statements therein with their responses reported in the Form U-5.