FINRA Expungement Award:

Advisor Prevails – Award/Judgment Customer Dispute Expunged

 

FINRA Expungement Award:

Advisor Prevails – Award/Judgment Customer Dispute Expunged

 

Award Date: August 25, 2021
Hearing Site: San Francisco, California
Respondent Firm: Wells Fargo Clearing Services, LLC
Claimant Representative: Ben Winograd, J.D.


Case Objective:

Twenty years into his career, a California advisor sought to expunge the one customer dispute on his otherwise-pristine record. While seeking expungement of a typical customer dispute can be difficult, this advisor faced the added challenge of attempting to win a recommendation for expungement of a dispute that had resulted in an award.


Case Summary:

Two days prior to Facebook’s initial public offering (IPO) in 2012, a new customer approached the advisor, seeking to participate in the IPO. Prior to the IPO, a limited number of shares would be available to pre-qualified investors at $38 each. However, the advisor informed the customer that he was too late to participate as a pre-qualified IPO participant, though he would be able to purchase shares on the open market, and he placed a market order for the customer.

By the time the order was processed, all shares priced at $38 had been purchased, and the customer’s transaction was executed at a share price of $42. Due to a Nasdaq system error, a report was released that inaccurately reflected the purchase price of the shares as $38. The advisor warned the customer that the share price appeared inaccurate and would likely be adjusted. Later that same day, the price was adjusted, as expected. The advisor informed the customer, and the firm mailed a transaction confirmation.

Subsequently, Facebook stock declined in value, and the customer liquidated it at a loss. He later filed for arbitration, alleging that the advisor had misinformed him regarding the price of Facebook shares and had failed to sell the shares when directed. The Arbitration Panel issued an award to the customer for the amount of the loss incurred from the purchase and sale of the Facebook stock.


Result:

The customer participated in the hearing and testified that he felt that he had been lied to by the advisor. However, the Arbitrator determined that the evidence supported the advisor’s testimony and stated that the advisor had “credibly testified that he followed the [c]ustomer’s instructions[,] and the company’s trade requirements and trade confirmations were consistent with that testimony.” The Arbitrator found that “the evidence demonstrated that [the customer] was mistaken, or simply did not have a good understanding of the IPO market process.”

In a remarkable win, the advisor prevailed and will now be able to remove the award/judgment disclosure from his CRD and BrokerCheck records.




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