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Award Date: May 17, 2024
Claimant Representative: Harris Freedman, J.D., HLBS Law
Respondent Firms: Lehman Brothers Inc. and Wells Fargo Clearing Services, LLC
Case Objective:
A Santa Monica, California-based advisor entering his 51st year in the industry sought to expunge two denied claims from his CRD and public BrokerCheck records. He hired HLBS Law to bring him through FINRA’s Dispute Resolution process.
Summary:
The first claim on the advisor’s record was lodged by a customer who had become a client of the advisor back around 1985. The advisor assessed the customer’s investor profile and recommended a variety of diverse investments for a balanced portfolio. His recommendations included limited partnerships (LPs). Some of the recommended LPs were designed to provide tax benefits, and others were designed for growth. The customer purchased the recommended LPs and spoke with the advisor regularly.
In the summer of 1998, domestic stock markets experienced a sharp decline, and the customer grew dissatisfied with the reduced income that was being produced by his portfolio as a result. In May of 1999, the customer alleged that the LPs, which he had purchased approximately 15 years prior, had been unsuitable and misrepresented. Lehman investigated and denied the claim, yet it remained on the advisor’s records for almost a quarter of a century.
The second customer became a client of the advisor in 1994 when she sought a better return than the low interest rates offered by her bank at the time. The advisor recommended various investments to the customer and spoke with her regularly. Around early 2000, the advisor recommended Putnam mutual funds and the customer purchased them.
When the markets declined soon thereafter due to the technology bubble and the events of September 11, 2001, the customer orally alleged that the Putnam funds had been unsuitable. Wells Fargo investigated and denied the claim, yet it too remained on the advisor’s records.
Resolution:
The firms participated in the advisor’s expungement hearing and did not oppose his request for expungement. The customers did not participate. The FINRA Arbitrator reviewed the written documents that were submitted prior to the hearing. She also listened to the advisor’s testimony and the arguments that were presented on his behalf by Harris Freedman, J.D., of HLBS Law.
Regarding the first claim, the Arbitrator found that, “at the time of the transaction, [the investment] was suitable” and that the customer “was provided written disclosures and indicated his understanding and consent by signing documents.” She also mentioned that “No evidence to disprove the testimony was presented.”
The Arbitrator found that the second customer complaint “indicates she wanted conservative income producing, and her profile indicates growth with cash accumulation.” Additionally, the advisor “testified that the investment at issue was researched and ‘decided’ by [the customer] and executed due to her instruction, not his recommendation, and actually with his objection.”
With the expungement of both claims recommended by FINRA’s Arbitrator, this longtime industry veteran may now continue his career without the old, meritless disclosures staining his otherwise positive public records.