FINRA Arbitrator Grants Expungement Of 3 Settled Disputes

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Award Date: March 30, 2022
Hearing Site: Albany, New York
Respondent Firm: Prime Capital Services, Inc.
Claimant Representative: Dochtor Kennedy, MBA, J.D.

Case Objective:

An advisor in upstate New York had three customer disputes on his records. Two dated back to 2004 and had been settled for hundreds of thousands of dollars. The third was a denied claim that had stuck around since 2010. The advisor sought the help of AdvisorLaw to restore his reputation through FINRA arbitration.

Case Summary:

The two disclosures from 2004 both involved variable universal life insurance policies, or “VULs.” Our advisor ensured that the VULs were suitable for the respective customers, and he provided the customers with all information and details about the VULs, including all disclosures.

The first customer was a town’s retirement plan, and the insured was the plan’s principal. The plan’s CPA and trustees were involved with the decision to purchase the VUL, and our advisor was supervised by three law firms in the process of the sale. Within five years of owning the VUL, the plan stopped funding it. The second customer was a doctor who purchased a VUL in 1999. When the markets declined over the next couple of years, he moved all of his investments to cash and chose to cease paying VUL’s premiums.

Both customers were warned that their policies would lapse if the premiums went unpaid, and both allowed their policies to lapse, regardless. The customers lodged complaints alleging misrepresentation and unsuitability and seeking damages between one and three million. Each dispute was settled for around $300,000.The third dispute involved a variable annuity (VA) purchased by an individual. When its death benefit later decreased due to market declines, the customer complained. The firm quickly denied the claim, but vague allegations regarding the annuity’s death benefit and damages were slapped on the advisor’s records.


Typically, an arbitration involving a settled dispute will require the settlement agreement to be produced. Due to the fact that the two settled disputes had been resolved over 15 years earlier, there were no settlement documents for the Arbitrator to review. However, our advisor’s testimony and the arguments made by Dochtor Kennedy, MBA, J.D. were sufficient for the Arbitrator in this matter.

The Arbitrator credited our advisor’s testimony, noting that the first VUL had “constituted less than one percent of the Plan’s portfolio,” that the second VUL had “constituted approximately five percent of the customer’s portfolio,” that both VULs had been suitable, and that our advisor had properly represented the policy to both customers.

Regarding the third claim, the arbitrator concluded that our advisor and the customer had “discussed the VA’s death benefit and the fact that it could potentially decrease” and that “the customer was provided with written materials relating to the VA[,] including a prospectus and illustrations.

The Arbitrator recommended the expungement of all three disputes, and our advisor will soon have them wiped from his records.

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Expungement Award