California Financial Advisor Wins FINRA Expungement of False Unsuitability Claim

AdvisorLaw successfully represented a California-based financial advisor in a FINRA arbitration to permanently expunge a false unsuitability claim stemming from the market-driven underperformance of a split-dollar life insurance strategy. The arbitration panel unanimously ruled the allegations were clearly erroneous and false, granting full expungement under FINRA Rule 2080 to restore the advisor's flawless 40-year BrokerCheck and CRD records.

A financial advisor in California with a 40-year, unblemished career faced a single, unwarranted customer complaint arising from market-driven underperformance in a carefully structured life-insurance funding strategy. Supported by AdvisorLaw, the advisor pursued FINRA arbitration to expunge the misleading disclosure from his CRD and BrokerCheck records.

In April 2021, he and his partner welcomed the then-57-year-old CEO of a credit union and his wife as clients. The investor was a sophisticated, accredited investor whose profile included:

• Annual income exceeding $464,000
• Liquid net worth over $1 million
• Total net worth above $5 million
• A moderately-conservative risk tolerance
• A five-year investment horizon

“The Panel unanimously finds that the Customer’s allegations that the investment scheme selections offered to him were unsuitable is clearly erroneous and false. The Customer’s allegations resulted from the underperformance of certain accounts over a period of time compared to his initial expectations. The lack of expected return did not make the selections unsuitable as suitability is determined at the time the investments are made. The Customer was a sophisticated investor working with [the advisor] as part of a team whereby all parties extensively researched and discussed the investments prior to the Customer willingly agreeing to the same.”