Unsuitability & Misrepresentation Cleared From Broker’s Record

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Award Date: October 5, 2021
Hearing Site: Chicago, Illinois
Respondent Firm: Wedbush Securities Inc.
Claimant Representative: Dochtor Kennedy, MBA, J.D., and Erika Binnix, J.D. 

Case Objective:

An advisor who has been in the industry for nearly three decades sought to expunge the one customer dispute plaguing his records through FINRA Arbitration.

Case Summary:

The advisor sought to expunge a more-than-a-decade-old disclosure from customers who had claimed that the advisor had recommended an unsuitable investment strategy and had failed to disclose its risks. Investors with a net worth of over $1 million sought income in 2009. They had a high-risk tolerance and no liquidity needs. The advisor recommended a diversified, buy-and-hold-based portfolio, but the customers rejected it and instead opted for leveraged ETFs and opened a discretionary account.

They signed numerous documents attesting to their knowledge of the accounts and strategy, its risks, and its suitability, as well as the details of the investments. The customers’ accounts subsequently declined in value when the market rebounded. They claimed misrepresentation and sought nearly $70,000 in damages. The firm denied the claim, and the customers escalated it to FINRA arbitration. Ultimately, the customers were awarded just over $50,000.


After reviewing the evidence and hearing testimony, the Arbitrator determined that the customers were fully informed of the risks of the strategy, and they had willingly accepted them. When the market unanticipatedly declined, their account lost value. The Arbitrator determined that the advisor had “acted in good faith at all times.” Additionally, the Arbitrator stated that FINRA Rules 2010 and 13206 did not apply to the proceeding, based on case law and logic, and the Arbitrator recommended expungement. The advisor may now move forward with a record free of customer dispute disclosures.

Contact us to discuss AdvisorLaw’s Disclosure Expungement services. The consultation is complimentary, and our services were created exclusively for financial advisors.

Expungement Award