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Award Date: April 7, 2023
Hearing Site: Boca Raton, Florida
Respondent Firm: Equitable Advisors, LLC and LPL Financial LLC
Claimant Representative: Doc Kennedy, MBA, J.D.
Case Objective:
More than 30 years into his career in the financial services industry, this Virginia-based Advisor had a stellar record, aside from two denied customer disputes that had hit his records between 2013 and 2015. The advisor hired Advisor Law to restore his excellent reputation through FINRA Arbitration.
Case Summary:
The first customers to lodge a dispute against our advisor had become his clients in the late 1990s, seeking assistance with retirement and financial planning. The couple had no life insurance, and our advisor recommended various investments, including mutual funds, annuities, and a variable universal life (VUL) policy issued by AXA (f/k/a Equitable). Our advisor explained all of the VUL details to the couple and provided them with all written explanations, as well. The policy was designed to cover the couple’s basic, long-term life insurance needs, and it didn’t require a large up-front deposit. Specifically, our advisor explained that the policy could require higher monthly premiums in the future if it were to lose value. The couple purchased the policy in 1997 and spoke regularly with our advisor until he left AXA in 2001. The customer’s account was assigned to another AXA advisor, and our advisor was not permitted to contact the couple again. Eleven years later, in late 2012, the monthly premiums for the VUL increased. Then in 2013, a customer dispute by the couple was reported to our advisor’s records, alleging misrepresentation back in the late 1990s. The firm denied the claim, but it stayed on our advisor’s records.
The second claim arose from a couple who became our advisors’ customers in 2014. They opened managed accounts with LPL, in which they purchased an annuity and ETFs. Later that year, the customers requested further diversification of their portfolio through purchases of alternative investments. Our advisor recommended two business development companies (BDCs) and a REIT. In addition to receiving all disclosures and details of the recommended investments, both orally and in written form, the customers signed LPL’s alternative investment purchase form on three separate occasions. Therein, they attested to their understanding of the investments’ terms, including illiquidity. The couple’s portfolio contained more than 15 separate accounts that included cash, savings bonds, annuities, mutual funds, and retirement accounts. The BDCs and REIT collectively represented less than 15% of the husband’s net worth.
Around mid-2015, the couple spoke to another financial advisor who spoke negatively about REITs and BDCs. The couple then expressed to our advisor that they were dissatisfied with the investments’ fees and wanted to liquidate them. Our advisor reminded a couple of the investments’ illiquidity. Then, despite the fact that their accounts had gained in value as a result of their work with our advisor, the couple lodged a dispute alleging that the REIT and BDCs had been unsuitable and illiquid. While LPL denied the claim, it still remained on our advisor’s records.
Result:
Equitable and LPL took no position on our advisor’s request for expungement. LPL participated in the expungement hearing, though neither Equitable nor the customer participated. The Arbitrator reviewed the written submissions and 40 exhibits submitted, and she listened to arguments from Dochtor Kennedy, J.D., MBA as well as the advisor’s testimony. After reviewing the history of the claims and the FINRA Dispute Resolution proceedings, the Arbitrator stated simply that “The record supports a finding that the information regarding the [claims] as set forth in [the advisor’s] BrokerCheck® Report is factually impossible or clearly erroneous and is false. Accordingly, [the advisor’s] petition for expungement of the [claims] is granted.”