South Dakota Advisor’s Termination Disclosure Revised After AWC, Fine, & Suspension

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Quick Summary

In a significant FINRA Dispute Resolution victory, AdvisorLaw’s securities attorneys Dochtor Kennedy, J.D., MBA, and Peter Lindholm, J.D. secured a full Form U5 expungement for a South Dakota-based financial advisor against LPL Financial LLC. The FINRA Arbitrator ordered the complete removal of a defamatory “Discharged” termination disclosure from the advisor’s CRD and BrokerCheck records, ruling the firm’s original filing inherently defamatory and directing the record to be officially changed to “Permitted to Resign.”

Case Objective:

In 2022, a South Dakota-based financial advisor and investment adviser representative (IAR) was 12 years into a clean industry career when he was hit with an LPL Financial termination. The firm issued a damaging Form U5 “employment separation after allegations” disclosure, triggering a corresponding FINRA regulatory disciplinary action. To clear his professional record, the IAR retained AdvisorLaw to seek a remedy through the FINRA Dispute Resolution forum.

Summary:

The advisor joined LPL Financial as a registered representative in 2018, where his responsibilities included assisting clients in rural areas with opening investment accounts. To facilitate this, he occasionally had account-opening documents sent to his firm email, walking clients through the e-signature process via Zoom or in person. For clients unfamiliar with e-signing or lacking email access, he e-signed on their behalf with their explicit authorization. Because LPL provided no training or education regarding e-signature policies, the advisor was unaware this violated firm policy.

In mid-2021, multiple clients gave the advisor explicit instructions to e-sign account-opening documents on their behalf. The advisor complied, received no extra compensation, and no clients filed complaints. However, LPL Financial initiated an internal investigation, resulting in the advisor’s termination in February 2022.

Following the termination disclosure on his BrokerCheck record, FINRA launched an investigation into the e-signature violation, resulting in an AWC, a $5,000 fine, and a three-month suspension. This created a second regulatory disclosure on the advisor’s public record.

Resolution:

Prior to the expungement hearing, LPL Financial denied the advisor’s allegations, raised affirmative defenses, and requested a dismissal.

At the FINRA expungement hearing, the Arbitrator reviewed the evidence and listened to the advisor’s testimony, alongside arguments presented by AdvisorLaw’s Dochtor Kennedy, J.D., MBA, and Peter Lindholm, J.D.

In the full and final resolution of the issue, the Arbitrator “recommend[ed] expungement of the Reason for Termination [on the advisor’s] Form U5 filed by LPL[.]” He directed that “The Reason for Termination shall be changed [from ‘Discharged’] to ‘Permitted to Resign’ and the Termination Explanation shall remain the same.” The Arbitrator recommended that the same apply to all references to the reason for termination and termination explanation and that “the response to the ‘Termination Type’ question [ ] be deleted in its entirety and replaced with [ ] ‘Permitted to Resign’[.]”

The Arbitrator explicitly justified the expungement recommendation based on the “defamatory nature of the information” contained in LPL Financial’s original disclosure.

Following this successful FINRA arbitration, the South Dakota financial advisor can now move forward in the wealth management industry without the burden of a meritless termination mark.

Contact AdvisorLaw

If you are fighting an erroneous, false, or defamatory Form U5 disclosure on your CRD or BrokerCheck profile, contact AdvisorLaw for a complimentary case review today.

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