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Case Objective & Summary:
This Arizona-based investment adviser representative (IAR) had a disclosure-free record since early 2012 until a settled customer dispute hit his records in mid-2020. Eager to get his perfect records back, the advisor hired AdvisorLaw to seek expungement through FINRA Dispute Resolution.
Around 2012, the IAR was training to become a financial advisor with Northwestern Mutual. In the training process, the IAR met a fellow trainee and his wife. Around 2018, the couple became clients of the IAR, and they indicated that they were interested in alternative investments. They held the majority of their assets with another advisor, who managed approximately $1.1 million in stocks and bonds for the couple.
The IAR made investment recommendations based on the couple’s investor profile and request for alternatives. The recommendations included the GPB Capital automotive portfolio. Coastal Equities performed due diligence on the GPB investment and determined it to be suitable for the couple. In early 2018, they invested $89,000 in the GPB investment.
About two years later, in May 2020, the State of Massachusetts Securities Division commenced an enforcement action against GPB, alleging that it was a Ponzi scheme. The couple was solicited by an attorney who recommended that they file a formal complaint against Global Equities. The couple filed for FINRA arbitration, and the firm settled with them for around $18,000.
Neither Global Equities nor the investor couple participated in the IAR’s expungement hearing. The FINRA Arbitrator reviewed the IAR’s statement of claim, the firm’s statement of answer, and the exhibits that were submitted. He listened to the advisor’s testimony, and Dochtor Kennedy, MBA, J.D., and Peter Lindholm, J.D. made their arguments in favor of expungement.
The Arbitrator noted that the alternative investments recommended by the IAR constituted “about 7% of the Customer’s portfolio” and that the IAR had “explained to the Customer, in detail, the terms, risks, costs and fees as well as the advantages and disadvantages of the investments.” He affirmed that “The Customer was provided with a personalized private memoranda, which also explained the risks and advantages of the investments[,]” as well. The Arbitrator found it notable that, “In recommending the GPB Automotive Fund to the Customer, [the IAR had] relied on [Global Equities’s] representation of this fund” and that, the advisor’s “designated supervisor, who represented [Global Equities], reviewed all of the documents related to the GPB Automotive Fund and confirmed that the fund was suited to the Customer.”
The Arbitrator reviewed what had transpired and found it worth mentioning that “The arbitration complaint against [the firm] was reported on [the IAR’s] CRD records even though no mention of any wrongful act of his was in the complaint.” He wrote that the complaint was settled as a business decision by the firm with no contribution by the IAR and that “the Customer is still a client of [his] today and signed a declaration dated September 8, 2021…that [the IAR] did nothing wrong in this matter.”
With a finding by the Arbitrator that the claim was clearly erroneous and false, the IAR will soon be back to having perfect records, reflective of his many years of integrity within the industry.