Arkansas Advisor Expunges Termination Disclosure Tied To 5 Customer Disputes

A former broker and investment adviser who began his career in 1993 maintained a consistent employment record — until his abrupt termination in 2023, after 20 years in the industry. Allegations surrounding his dismissal suggested that he had settled customer complaints away from the firm, in violation of firm policy. Hoping to swiftly remove the mark from his records, the rep hired AdvisorLaw to guide him through the FINRA Dispute Resolution process.

Before 2020, the advisor had a completely clear public record with no disclosures. In 2020, two customers complained, and the claims were settled. 

Then, in December 2022, a customer’s stock was mistakenly liquidated due to an assistant’s oversight and automated rebalancing software. To remedy that issue, the advisor purchased the shares back at a lower price, which resulted in a benefit to the customer. The customer did not complain. 

Later, following false accusations by the advisor’s former partner about overcharging fees, multiple clients raised concerns. While none of the clients filed official complaints, and the advisor had not overcharged any customer, he conducted internal audits and issued substantial, retroactive fee refunds to maintain client relationships. Separately, a technology error prevented an automatic fee adjustment in another customer’s account, following the customer’s 401(k) rollover. The advisor identified the issue and informed the firm, which filed an errors and omissions claim without the advisor’s prior knowledge. 

The firm then launched an internal investigation into all of the matters, in August 2023. The advisor cooperated fully and provided evidence of all client payments. Nevertheless, the advisor was terminated in October 2023 for settling complaints outside the firm. In addition to the termination disclosure, the firm chose to subsequently report all of the aforementioned client interactions as official complaints, which included allegations of unauthorized trades and fee disputes. In total, the advisor ended up with eight disclosures riddling his records.

Following the advisor’s submission of his Statement of Claim for FINRA arbitration, the firm filed its Statement of Answer. Therein, it requested that it be dismissed from the matter, that the advisor receive no damages from the firm, that the Arbitrator assess all costs of the proceeding to the advisor, and that other relief be granted as the Arbitrator saw appropriate. 

The Arbitrator declined to oblige the requests of the firm and instead proceeded with the hearing. She listened to the advisor’s testimony, reviewed the evidence, and heard the arguments in favor of expungement presented by AdvisorLaw’s Dochtor Kennedy, MBA, J.D. and Peter Lindholm, J.D.

The Arbitrator concluded that expungement was warranted, “based on the defamatory nature of the information” included in the disclosure. Specifically, she recommended the expungement of the Reason for Termination and Termination Explanation in Section 3 of the advisor’s Form U5. She directed that the Reason for Termination be changed to “Voluntary” and that the Termination Explanation “should be deleted in its entirety and shall appear blank.” The Arbitrator further recommended the expungement of all references to the occurrence numbers corresponding to the termination and the related internal review from the CRD, as well as that any “Yes” answers be changed to “No,” as applicable. 

With the harshest of all marks on his records soon to be fully expunged, this advisor may begin to proceed with seeking expungement of the customer disputes that corresponded with the defamatory-in-nature termination disclosure. 

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.