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Award Date: October 6, 2023
Claimant Representative: William Bean, Esq., HLBS Law
Respondent Firms: Citigroup Global Markets, Inc. and J.P. Morgan Securities, LLC
Case Objective:
This New Jersey-based advisor has been in the financial services industry for nearly 25 years. His records were spotless, until he was hit with two customer disputes between 2011 and 2013. He lived with the marks on his records for a decade before deciding to hire HLBS Law to help him seek expungement through FINRA Dispute Resolution.
Case Summary:
Around 2001, a couple became clients of the advisor. They sought municipal bonds and tax-free income. The advisor recommended a fund that was comprised primarily of municipal bonds and was suitable for the couple’s investor profile. The couple purchased the fund and signed all required documentation.
In late 2005, the advisor transferred his registration away from Citigroup. While the couple remained clients of the advisor, the fund was proprietary to Citigroup and therefore could not be transferred.
Four years later, the fund became insolvent, and the couple filed for FINRA arbitration, alleging unsuitability and misrepresentation. Citigroup denied the claim, but it later settled with the couple for about $20,000 of the $600,000 in damages sought.
Another investor had become a client of the advisor around 2001, as well. According to the investor’s profile, the advisor initially recommended municipal bonds. Over time, as interest rates declined, the investor grew less interested in municipal bonds and more interested in a portfolio with objectives of income and appreciation.
The investor followed the advisor when he transferred to UBS in 2005 and again, when he transferred to J.P. Morgan in 2009. During that time, the investor made several purchases of a fund recommended by the advisor. In early 2013, the investor instructed an associate of the advisor to liquidate certain amounts of his position in that fund. The associate followed the instructions, and all liquidations were confirmed with the investor, both verbally and in writing.
In June 2013, the investor spoke to the advisor’s manager. Though the investor did not intend to lodge a formal complaint, the advisor received a second disclosure on his records, alleging a failure to follow instructions. J.P. Morgan denied the claim.
Result:
Citigroup and J.P. Morgan both participated in the hearing, though neither firm took a position on the advisor’s request for expungement. None of the customers participated in the hearing. The FINRA Arbitrator listened to William Bean, J.D.’s arguments in favor of expungement on behalf of the advisor, as well as to the advisor’s testimony. He also reviewed all of the documents and exhibits that had been submitted.
Regarding the first customer dispute, the Arbitrator noted that, once the advisor switched firms, and when the fund later imploded, “there was nothing [that the advisor] could do,” as he “had not managed the investment for years.” The Arbitrator also pointed out that the advisor asserted “that he was named because he was the person who originally set the couple up with the investment.” Determining that “there was never any finding of liability or wrongdoing on [the advisor’s] part, expungement is deemed appropriate,” the Arbitrator recommended expungement of the claim from the advisor’s records.
Regarding the second claim, the arbitrator simply noted that “J.P. Morgan fully investigated [ ] the claim and found that it had no merit,” that the “customer never went forward with any claim after it was dismissed by J.P. Morgan,” and that, at the hearing, “J.P. Morgan’s representative stated that J.P. Morgan did, in fact, conduct a complete investigation of the matter.” Concluding that “there was never any factual finding of wrongdoing,” the Arbitrator wrote that “expungement is recommended.”
With the two disclosures on his records soon to be removed, this advisor will reap the benefits of a perfect public profile for the first time in a decade.