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Award Date: September 8, 2021
Hearing Site: Portland, Oregon
Respondent Firm: Berthel Fisher & Co. Financial Services, Inc. and LPL Financial LLC
Claimant Representative: Dochtor Kennedy, MBA, J.D.
An Oregon-based investment advisor representative and firm managing member has been in the industry for 20 years. In 2015 and 2016, the advisor was slammed with five customer dispute disclosures. Seeking to clean up his records, the advisor hired AdvisorLaw to pursue expungement through FINRA Arbitration.
Between 2008 and 2016, the advisor recommended REITs when they were suitable for his customers. All details of the REITs were fully and accurately explained to the customers. They were provided with and signed disclosures acknowledging the illiquid nature and risks of the REITs, and the investments comprised appropriate percentages of each customer’s portfolio. One of the customers purchased several REITs over the course of seven years.
Then, in 2015, the advisor was out of the office for several weeks. During that time, the customer came to believe that money was missing from his accounts. The advisor assured the customer that he would address the issue as soon as he returned. However, before the advisor returned, the customer contacted three other customers of the advisor and an attorney, and all four lodged complaints against the advisor with allegations of overconcentration, unsuitability, and misrepresentation of REITS.
It turned out that the customer’s funds were “missing,” because the customer had authorized withdrawals and transfers to his ex-wife. Two of the claims were closed with no action, and two were settled in arbitration for a fraction of the damages sought.
None of the underlying customers participated in the arbitration hearing. Upon hearing the advisor’s testimony and reviewing documents, the Arbitrator acknowledged “the remarkable coincidence of the near-simultaneous filings” of three of the claims, that they were abandoned and not pursued by the customers, the “substantially identical nature of the asserted claims, and a paucity of supporting facts for any of them,” the “similar legalistic syntax employed,” and the fact that the customers knew one another outside of their association with the advisor.
The Arbitrator found that the investments and their concentrations had been suitable for all of the customers and that there was no evidence to support the claims of misrepresentation. He determined that the settlements were likely “cost-of-defense” business decisions made by the firms. The Arbitrator concluded that the first customer, “likely in a pique of anger or frustration,” had “knowingly unleashed a cascade of claims” against the advisor and firms.
The Arbitrator recommended the expungement of all five disputes, stating that their continued publication on the advisor’s records “gives the reader a patently negative and decidedly false impression of [his] integrity as a financial advisor.”
Contact us to discuss AdvisorLaw’s Disclosure Expungement services. The consultation is complimentary, and our services were created exclusively for financial advisors.
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