Ms. Wright notes that a few anomalous cases have distorted defendants' perceptions of the true danger of liability. In reality, Form U-5 defamation actions are a very small fraction of SRO arbitrations. Moreover, there have been only five Form U-5 defamation judicial decisions since 1989. Few of these claims and cases have resulted in substantial awards attributable to defamation alone. There have been no awards when the statements complained of were made inadvertently or otherwise in good faith.
Qualified immunity is forfeited when an employer acts in bad faith.
The Second Circuit and a lower federal court have also found that broker-dealers are entitled to qualified immunity. However, these courts have based the qualified immunity on a privilege for statements made pursuant to a legal duty. This privilege may be overcome if the statements were made in bad faith or with actual malice, personal spite, ill will, or culpable recklessness. Ms. Wright notes that the truth is an absolute defense to a defamation claim and argues that no compelling case has been made for the adoption of an absolute immunity standard for Form U-5 reporting, particularly in light of abuses that have occurred with respect to such reporting.