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Award Date: July 12, 2024
Claimant Representative: Alex Padla, J.D., HLBS Law
Respondent Firm: Merrill Lynch, Pierce, Fenner & Smith Incorporated
Case Objective:
This California advisor has maintained a perfect public BrokerCheck record since early 1998 — except for a single customer dispute in 2016. In hopes of getting the mark expunged, he hired HLBS Law to pursue expungement through FINRA arbitration.
Summary:
In late 2014, an investor became a customer of the advisor, when he inherited her account. The advisor met with the customer, reviewed her portfolio, and recommended liquidating several energy-related stocks. The customer then asked for advice regarding energy investments.
The advisor explained a strategy of taking losses on the customer’s existing energy-related stocks to offset capital gains while retaining exposure to the energy sector. The customer liked the strategy and chose to implement it. Additionally, she purchased an auto-callable, market-lined, step-up note related to the S&P’s Oil and Gas Exploration and Production Select Industry Index. Subsequently, the customer purchased two other recommended notes.
While the customer’s portfolio experienced substantial gains, two of her notes were redeemed at a loss. In September 2016, the customer lodged a claim alleging misrepresentations, unsuitable recommendations, and failure to follow instructions. She sought over $400,000 in damages, and Merrill Lynch settled with her for around $60,000.
Resolution:
Merrill Lynch participated in the advisor’s expungement hearing and did not oppose his request to expunge the claim. The FINRA arbitrator reviewed all written materials submitted, and he listened to the advisor’s testimony and the arguments in favor of expungement presented by Alex Padla, J.D., HLBS Law.
The Arbitrator’s award stated that “Based upon the pleadings, [the advisor’s exhibits], and [his] credible sworn testimony, the Arbitrator found that the allegations contained [in the claim] are erroneous and false.” He noted that “The Customer asked for the market-lined investments (‘MLIs’) which she purchased” and that the advisor had “dutifully explained the MLIs to the Customer and provided the related prospectus and other information to be sure that the Customer understood the investments which she purchased.” He added, “Moreover, the MLIs which were purchased represented only 3.8% of the Customer’s portfolio” and that “The Customer’s allegations appear to have been motivated by a decline in the value of the two MLIs which she purchased and [the claim was] not related in any way to [the advisor’s] action or any failure to act [on his part.]”
With the Arbitrator’s recommendation to expunge the erroneous allegations from the advisor’s records, he will soon have a record reflective of over 25 years of perfect conduct in the industry.