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Award Date: May 5th, 2021
Hearing Site: Philadelphia, PA
Respondent Firm: First Colonial Securities
Claimant Representative: Dochtor Kennedy, MBA, J.D.
Case Objective:
A financial advisor who had been in the industry for over 37 years sought expungement of a customer complaint. The customer had alleged that the financial advisor placed in an unsuitable and unauthorized trade of convertible bonds in the iconic LA Gear shoe company, back in the 1990s. The customer sought damages of approximately $8,000, due to the alleged sales-practice violations.
Even though the complaint was decades old, the advisor decided to hire AdvisorLaw to protect his legacy and expunge what he believed to be a meritless disclosure.
Case Summary:
Through FINRA’s Dispute Resolution Forum, and under the criteria set forth in FINRA Rule 2080, AdvisorLaw pursued expungement of the claim, arguing that the allegations were false and erroneous.
The advisor had held regular investment meetings with his client over five consecutive years. He offered a portfolio of a balanced and diversified mix of mutual funds and individual securities. The investor had a moderate risk tolerance, was seeking long-term growth, and had no current liquidity needs.
The customer was familiar with LA Gear stock and had personally met with representatives of the company. Aware that the bonds were highly rated by credit rating agencies, the customer purchased the bonds over multiple transactions. As the end of the millennium neared, LA Gear filed for Chapter 11 bankruptcy, and the bonds’ value was cut in half. The investor then filed a complaint directly with the NASD, alleging losses and reasons for the dispute. After a thorough investigation, the advisor’s firm denied the claim, finding it to be without merit. In addition, the NASD dismissed the complaint with no action taken.
At the hearing, AdvisorLaw took the position that the advisor had a reasonable basis for believing that the LA Gear bonds were suitable, based upon their rating from credible agencies, as well as the investor’s relationship with representatives of LA Gear.
Additionally, AdvisorLaw argued that the allegations of unauthorized trading should be found to be erroneous, in that the investor verbally authorized transactions of the bonds, multiple times, over meetings that spanned nearly five years.
Result:
After reviewing the evidence submitted to FINRA’s Arbitration Panel, the Panel found that all occurrences referencing the complaint must be removed and expunged from the advisor’s CRD record and public BrokerCheck page.
Pursuant to Rule 13805 of the Code of Arbitration Procedure, the Arbitrator found that the allegations were indeed false and erroneous. Specifically, the allegation of “unsuitable” was false, as “the advisor conducted reasonable diligence to ascertain [the customer’s] investor profile [and relied upon] the direct statement of the customer himself.”
Secondly, the allegation of unauthorized trading, “…makes no sense.” The fact that the investor received and reviewed offering documents, on multiple occasions, served as damning evidence that not only was the advisor falsely accused, but the allegations themselves were not even logically feasible — allegations that the advisor had on his public record for over two decades.
It’s great to see an advisor who has put in so many years as a steward of his customers’ financial well-being finally has the opportunity to clear his good name.
Contact us to discuss AdvisorLaw’s Disclosure Expungement services. The consultation is complimentary, and our services were created exclusively for financial advisors.