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Award Date: January 4, 2024
Claimant Representative: Michael Bessette, J.D., HLBS Law
Respondent Firm: Woodbury Financial Services, Inc.
Financial Advisor IQ Article
Case Objective & Summary:
Two registered reps in Pennsylvania — a father and son — were both terminated from the firm, on the same date, for the same alleged reason. Each had been in the industry for more than two decades, and neither had any other significant marks on his record. Seeking to restore their records and reputations, they hired AdvisorLaw’s affiliate, HLBS Law, to seek expungement through FINRA Dispute Resolution.
Summary:
About two years after registering with Woodbury, the advisors were informed by their field marketing organization about a six-week sales promotion providing customers with loosened restrictions on internal transfers of Allianz annuities. The advisors were encouraged to identify customers who could benefit from transferring their existing contracts into new ones with improved benefits and features.
Initially, the advisors identified and reviewed approximately 40 customer annuity contracts, belonging to 26 customers, that were eligible for the transfer. The advisors consulted with Woodbury’s sales, suitability, and compliance departments, as well as with their office of supervisory jurisdiction. They spoke with the 26 customers individually, discussing the transfer opportunity and the possible benefits of the new annuities.
Of the 26 customers, all but one chose to move forward with the proposed transfer. The advisors received authorization from each of the customers and ensured that no transactions would take place until signatures for transfers and funding were obtained from the customers, and each of the customers were approved for suitability.
The advisors followed the firm’s guidelines for processing the paperwork on behalf of the customers. Due to the sheer amount that needed processing, not all paperwork was completed at the same time. Though Allianz had previously agreed to extend the funding period for the contracts until December 2021, the advisors were later informed that no transfers would be processed after August 6, 2021. The decision to shorten the funding period had been made at the behest of the head of Woodbury’s suitability department.
Subsequently, the firm informed the advisors that all of the transfers were being scrutinized. Then in early September 2021, the advisors were subjected to an unannounced audit. The suitability department then claimed that some of the customers stated that they had not approved or signed their transfer documents. Yet one of the contracts in question belonged to one of the advisors himself, and another belonged to his spouse.
Woodbury terminated both advisors in mid-September of 2021 for allegedly opening accounts on behalf of clients without their knowledge. Despite the fact that there was zero merit to the allegations, termination disclosures now marred both advisors’ records.
Result:
Upon receiving notice of the advisors’ FINRA arbitration filing, Woodbury filed a counterclaim seeking at least $10,000 from the advisors. At the hearing, the advisors requested compensatory damages from Woodbury in the amount of $727,752.
A three-arbitrator panel heard the advisors’ case for expungement. They listened to testimony from both parties, as well as arguments in favor of expungement presented by Michael Bessette, J.D.
Deciding on a full and final resolution of the issues, the FINRA Panel determined that Woodbury was liable and shall pay the advisor fees totaling approximately $500,000, for compensatory damages, expert witness fees, etc. The Panel denied Woodbury’s counterclaim. It recommended the replacement of the termination explanations on both advisors’ records, eliminating the defamatory-in-nature language which indicated that the advisors had made unauthorized annuity purchases. Their records now reflect less-severed allegations of simple firm policy or procedure violations. The Panel’s decision was based on the defamatory nature of the information originally published in the disclosures.
With the damage to their records soon to be mitigated and more than $500,000 in damages and fees recovered this father-and-son team may now move forward with a restored reputation and stronger footing in the industry.