New Jersey Advisor Wipes Sole Disclosure From His Public Records

Award Date: May 23, 2024
Claimant Representatives: Peter Lindholm, J.D. and Owen Harnett, J.D., HLBS Law
Respondent Firm: Capital One Investing, LLC

Case Objective:

This New Jersey-based advisor had been in the industry for about 24 years with an exemplary track record. But one, denied customer dispute on his records since 2016 indicated otherwise. Seeking a record reflective of his years of professional conduct, the advisor hired HLBS Law to help him seek expungement through FINRA Dispute Resolution.

Summary:

In 2015, an investor became a client of the advisor through a referral. He was seeking a higher rate of return. The advisor made various recommendations based on the investor’s profile, including a structured CD that was insured by the FDIC. 

In order to purchase the recommended CD, the advisor recommended a transfer of funds from one of the investor’s fixed annuities. They discussed withholding taxes and completed an annuity distribution form, where the investor was able to indicate his desired tax withholding. The advisor recommended that the investor speak with a tax professional regarding the liquidation of funds from his annuity. The customer purchased the CD and did not speak with the advisor again. 

Then in 2016, a customer dispute by the customer was reported to the advisor’s records, alleging that the advisor’s recommendation had created a $32,000 taxable event and requesting restitution in the same amount. The firm denied the claim after determining that the investor had been aware of the tax implications and that he had been provided an opportunity to elect his desired tax withholding.

Resolution:

The investor did not participate in the advisor’s expungement hearing. The firm did participate, though it did not oppose the advisor’s request. The Arbitrator listened to the advisor’s testimony and arguments in favor of expungement presented by Peter Lindholm, J.D. and Owen Harnett, J.D., and he reviewed the pleadings and exhibits that were submitted.

After reviewing all information presented to him, the Arbitrator determined that “The [advisor] and Customer specifically discussed withholdings taxes, in connection with the distribution of funds from the annuity.” He also mentioned that “The Customer was aware that the purchase of the disputed CD with [funds] from the annuity would create withholdings taxes” and that, “A year later, the Customer alleged that the [advisor had] advised him to surrender an annuity and purchase a structured CD and that the transaction created a $32,000 taxable event.” The Arbitrator pointed out that the firm had denied the claim, “finding that the Customer had been aware of the tax implications of his investment and that he had been provided an opportunity to elect his desired level of tax holding” and that the advisor had “clearly showed that the customer signed a form indicating their decision to not have income taxes withheld, as well as the fact that the original firm investigation found no cause for the customer.”

As the Arbitrator recommended expungement, this advisor will soon have a record free of any disclosures whatsoever.

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