The New York Court of Appeals Rules That an Employer’s Statements on an

On March 29, 2007, the New York Court of Appeals held in Rosenberg v. MetLife, Inc., USCOA, 2 No. 23 (Mar. 29, 2007), that an employer’s statements on an NASD employee termination notice (Form U-5) are protected by an absolute privilege in defamation lawsuits, resolving a conflict among the New York Appellate Divisions.

NASD member firms are required by the rules of the NASD to file an accurate Form U-5 when a registered person’s association with the broker-dealer is terminated. Despite this complete candor requirement, the courts of some states leave former employers vulnerable to suits for defamation based on information provided on the Form U5 because they only protect such statements with a qualified privilege. Under the laws of most states, including New York, statements subject to a qualified privilege are still actionable if a plaintiff can demonstrate that the statements were made with malice. “In contrast, an absolute privilege immunizes a communicant from liability.” This absolute privilege, however, is “generally reserved for communications made by individuals participating in a public function, such as executive, legislative, judicial, or quasi-judicial proceedings.” In extending absolute immunity to Form U5 reporting, the Rosenberg decision recognizes the public function of the Form U5 reporting requirement and the need to encourage complete candor in such reporting.

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Interagency Proposal for Model Privacy Form Under the Gramm-Leach-Bliley Act

On March 20, 2007, eight federal regulators (the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller, the Office of Thrift Supervision, and the Securities and Exchange Commission (collectively, the Agencies) requested comment on a model privacy form (the Model Form) that financial institutions, including registere  investment advisers, registered investment companies and brokerdealers, may use for their privacy notices to consumers, as required by the Gramm-Leach-Bliley Act (the GLB Act).

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SEC Issues Proposal to Amend Financial Responsibility Rules for Broker-Dealers

On March 9, 2007, the SEC issued a proposal to amend numerous aspects of its financial responsibility rules for broker-dealers, including the following rules under the Securities Exchange Act of 1934: Rule 15c3-1 (the net capital rule), Rule 15c3-3 (the customer protection rule), Rules 17a-3 and 17a-4 (the books and records rules), and Rule 17a-11 (which requires brokerdealers to notify regulators regarding certain aspects of their capital compliance and recordkeeping). A number of the proposals are highly technical and, if adopted, could create operational issues for many broker-dealers. Comments will be due to the SEC 60 days after the proposal is published in the Federal Register, which will likely be sometime during the week of March 12, 2007.

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