Termination Expungement Win For California IAR

This California-based former broker and current investment adviser representative (IAR) began her career in 2003. Six years later, she found herself being terminated from her then-current firm, LPL, for an alleged failure to cooperate during account-opening and customer-identification reviews. After enduring the effects of the termination disclosure on her records for the greater part of her career, the IAR hired HLBS Law to seek expungement of the mark through FINRA Dispute Resolution. 

The IAR joined LPL in December of 2008. On February 9, 2009, a senior analyst with LPL emailed the IAR regarding an allegation that one of her clients had had $34,000 seized by the Drug Enforcement Administration at the Canadian border in December 2008. The senior analyst asked the IAR to investigate by contacting the client directly.

The IAR, uncomfortable addressing the issue without legal support, requested assistance from LPL’s legal and compliance departments. She explained that she was unaware of any unusual activity in the client's account and requested that the senior analyst conduct his own investigation. Despite multiple requests for legal help, The IAR received no response from LPL’s compliance department, and her concerns went unaddressed.

On February 26, 2009, the IAR was terminated for allegedly failing to comply with instructions, although she had sought guidance throughout the process. LPL then closed the client’s account on March 3, 2009, without explanation. Additionally, on April 16, 2009, LPL reported on the IAR's Form U5 that she had been "discharged" for failure to cooperate during customer reviews, which led to a significant loss of clients and financial hardship for the IAR. She continued to face difficulties in her career due to the impact of the disclosure on her public record.

The FINRA Arbitrator reviewed the IAR’s Statement of Claim for arbitration, LPL’s Statement of Answer, and the exhibits that were submitted. He listened to testimony from both the IAR and LPL, and he heard Austin Davis, J.D. of HLBS law present arguments in favor of expungement on behalf of the IAR.

After considering all of the testimony and evidence, the Arbitrator recommended expungement of both “the Reason for Termination and [the] Termination Explanation in Section 3 of [the IAR’s] Form U5[.]” He added that “The Reason for Termination shall be changed to ‘Voluntary[,]’” that “the Termination Explanation should be deleted in its entirety and shall appear blank[,]” and that “This directive shall apply to all references to the Reason for Termination and Termination Explanation.” Further, the Arbitrator recommended “the expungement of all references to [the occurrence] from the registration records maintained by the CRD for [the IAR, and that any] ‘Yes’ answers should be changed to ‘No,’ as applicable.” 

The Arbitrator noted that he had recommended expungement based on the defamatory nature of the information.

This termination disclosure is the sole mark on an otherwise-perfect record for the IAR, and soon her CRD and public BrokerCheck® records will reflect her stellar service to the industry for the past 22 years.

Facing a similar situation? Contact our team today for a complimentary consultation to evaluate your case. Our experts will assess the viability of expungement and guide you through the process.