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Award Date: August 12, 2024
Claimant Representatives: Dochtor Kennedy, J.D., MBA, and Peter Lindholm, J.D.
Respondent Firm: LPL Financial LLC
Case Objective:
In 2022, this South Dakota-based investment adviser representative (IAR) and former broker was 12 years into his career in the industry, when he was hit with a termination, a Form U5 “employment separation after allegations” disclosure, and a corresponding regulatory disciplinary action disclosure. With no other marks on his records, this IAR hired AdvisorLaw to help him seek a remedy through the FINRA Dispute Resolution forum.
Summary:
The advisor joined LPL as a registered representative in 2018, and one of his job responsibilities was assisting clients who lived in rural areas with opening accounts. On occasion, he would have the account-opening documents sent to his firm email address, and he would walk the clients through e-signing the documents, either in person or via Zoom. For clients who were unfamiliar with e-signing or who did not use email, he would e-sign on their behalf with their authorization.
As the advisor received no training or education from LPL on the topic of e-signatures, he was unaware that his actions were a violation of LPL policy.
In mid-2021, several clients gave the advisor explicit instructions to e-sign their account-opening documents on their behalf, and the advisor complied with the client’s instructions. He received no compensation in connection with his actions, and none of the clients complained. However, the firm initiated an internal investigation into the advisor’s actions in June 2021.
In February 2022, the advisor was terminated, and he received a termination disclosure on his record, alleging that he had e-signed documents on the client’s behalf. FINRA then initiated its investigation into the advisor’s conduct, which resulted in an AWC, a fine of $5,000, and a three-month suspension. The advisor received a second disclosure on his record for the regulatory action taken by FINRA.
Resolution:
Before the advisor’s expungement hearing, LPL denied most of the advisor’s allegations and asserted various affirmative defenses. It also requested an award dismissing any allegations of wrongdoing on its part.
At the expungement hearing, the FINRA Arbitrator listened to the advisor’s testimony, as well as the arguments on behalf of the advisor by Dochtor Kennedy, J.D., MBA, and Peter Lindholm, J.D. The Arbitrator considered the pleadings and evidence, and any post-hearing submissions, as well.
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’s justification for his recommendation was based on “the defamatory nature of the information” contained in the termination disclosure.
Having found success in FINRA arbitration, despite the regulatory action previously taken by FINRA, this advisor may now carry on with his career with a gentler and far less damaging reflection of his 2022 termination.