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Award Date: April 14, 2023
Respondent Firm: Cetera Advisors LLC
Claimant Representative: Doc Kennedy, J.D., MBA
In 2021, after two decades in the industry, this Oregon advisor was hit with two customer disputes alleging unsuitability. Both had been settled for relatively-nominal amounts, but the advisor wanted to clear his records of the allegations. He hired AdvisorLaw to guide him through FINRA’s Dispute Resolution forum.
Around 2014, a colleague of our advisor sponsored an investor conference that included a presentation on real estate investment trusts (REITs). Two attendees sought out our advisor, separately, and both expressed their interest in investing in REITs. The majority of both investors’ portfolios were held away from Cetera, and their portfolios were balanced and diversified. The investors sought to use a small portion of their assets to invest with a more substantial risk tolerance, in hopes of receiving higher income. Our advisor recommended various investments, including specific REITs with good track records.
One investor purchased a REIT in 2015, and the investment represented less than five percent of his portfolio. The second investor purchased four REITs between 2013 and 2015, and they collectively comprised less than ten percent of his portfolio. Over the next few years, the advisor and the investors spoke regularly. The advisor made other recommendations to the investors, but both were exclusively interested in income-producing, nontraditional investments. In January 2017, one REIT suspended distributions and redemptions, and it was renamed soon thereafter. That fall, our advisor transferred firms and ended the advisory relationships. Amid the economy’s reaction to the Covid-19 pandemic in 2021, the REIT filed for bankruptcy protection. The first investor filed for arbitration without naming the advisor. He sought $25,000 in compensatory damages, and the firm settled with him for $7,500. The other investor also made a claim, alleging unsuitability. That investor sought $100,000 in damages, and Cetera settled with him for $4,000.
Neither the firm nor the customers participated in the FINRA expungement hearing. The Arbitrator reviewed the submissions and settlement documents. He listened to the advisor’s testimony and Dochtor Kennedy’s , J.D., MBA arguments in favor of expungement. Determining that both of the disclosures met the FINRA Rule 2080(b) criteria for expungement, the Arbitrator simply explained that the disclosures “involved purchases of [REITs] by the Customers who were fully informed of the risks, consistent with their overall portfolio, and consistent with investment objectives. Accordingly, the Arbitrator finds that the claims and allegations against Claimant are false.”With both of the 2021 disclosures wiped from his public BrokerCheck and CRD profiles, this advisor can enter the next two decades of his career with clean and clear records and reputation.