FINRA Panel Grants Customer Dispute Expungement For Maryland Advisor

• Case Outcome: A three-arbitrator FINRA Panel unanimously granted the expungement of a 2015 customer dispute from the advisor’s CRD and BrokerCheck records.
• Core Allegations: The claim involved a 2015 filing alleging negligence and fraud related to a $100,000 equipment leasing investment made during the 2008 financial crisis.
• Key Findings: The Panel found the allegations "false and clearly erroneous," noting a total lack of specific facts or evidence linking the advisor to any wrongdoing.
• Investment Context: The investment represented only 5% of a $2M portfolio for sophisticated clients who had signed all necessary risk disclosures and subscription agreements.
• Legal Rationale: Relief was granted under FINRA Rule 2080, with the Panel highlighting that the firm settled the original claim for just 7% of the requested damages as a "business expedient" without the advisor's involvement.

A Maryland-based financial advisor with nearly three decades of exemplary service encountered a solitary, unfounded customer dispute following a market downturn. The 2015 complaint baselessly alleged negligence, breach of fiduciary duty, negligent supervision, breach of contract, and fraud related to a modest equipment leasing investment. Backed by AdvisorLaw, the advisor sought expungement in FINRA arbitration to purge the misleading mark from his records.

The advisor commenced his career in February 1996. In 2007, he assumed oversight of accounts for a sophisticated couple: a 63-year-old home builder and his 65-year-old technology executive spouse. They had over 30 years of investment experience, an annual income of $200,000, a liquid net worth of $2 million, and a total net worth of $2.5 million. Their stated goals emphasized growth and income with high risk tolerance, no immediate liquidity demands, and an investment time horizon exceeding ten years.

Tailoring recommendations to their profile, the advisor proposed a balanced, diversified strategy encompassing equities, bonds, annuities, and alternative assets, including a high-yield equipment leasing fund. He meticulously detailed the fund’s terms, risks, costs, fees, benefits, and drawbacks. The clients invested $100,000 in the fund around 2008, signing subscription documents and affirming their comprehension after reviewing the fund’s offering materials. Their fund position constituted just 5% of their $2 million portfolio.

Amid the 2008-2009 financial crisis, the portfolio’s value dipped, prompting the clients’ dissatisfaction. They subsequently moved assets to another broker. Influenced by a law firm targeting similar investors, they filed a vague arbitration claim in 2015 demanding $300,000 in damages, without naming the advisor or consulting him.

Centaurus settled for $21,000 in October 2016, purely as a business expedient, representing a mere fraction of the claim and absent any advisor involvement. This lone disclosure tainted the advisor’s otherwise immaculate CRD and BrokerCheck records, while offering no genuine investor protection.

The advisor filed for expungement in March 2025. Centaurus filed a non-oppositional answer in May. The clients were properly served and declined to participate. Maryland’s securities regulator opposed the advisor’s efforts in writing but did not attend. 

The Panel stated in its award that the allegations and claims were false and clearly erroneous, and it cited several facts to support that conclusion, including that: “Customers’ SOC is deficient in alleging any specific facts attributable to [the advisor]” and that that “lack of specificity in the Customers’ SOC leads to the conclusion that there was no violation by [him].” Additionally, “The Customers never complained to [the advisor] while they were still [his] customer…[the advisor] testified [that] the allegations were not true…The Customers SOC was settled by [Centaurus] without the participation of the [advisor] for approximately 7% of the claimed damages…The Customers were experienced investors [with] a diversified portfolio…[and t]here is no support or documentation in the Customers’ SOC that any recommendation was unsuitable for the Customers or that [the advisor] failed to disclose to the Customers the risks of any recommended investment.”