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Award Date: May 13, 2022
Hearing Site: Seattle, Washington
Respondent Firm: Bank of America Securities LLC
Claimant Representative: Dochtor Kennedy, MBA, J.D.
Case Objective:
A Seattle-based advisor had a customer dispute disclosure on his records since 2002, reflecting $650,000 in damages sought and a settlement of $225,000. Seeking to clear his record of the sole disclosure, the advisor sought expungement through FINRA arbitration with the help of AdvisorLaw.
Case Summary:
In 2001, a couple was referred to the advisor. They represented themselves as sophisticated investors with extensive experience with numerous types of investments. They sought growth with an aggressive risk tolerance for a small portion of their wealth. The customers wanted to invest solely in wireless internet stocks and would only accept recommendations that fit that narrow criterion. The customers directed their own trading, primarily on an unsolicited basis. When their account began to decline along with the precipitous declines in the technology sector of the market around that time, the customers began to use margins and purchase penny stocks, also on an unsolicited basis.
While the advisor repeatedly cautioned the customers about the use of margin, the low quality of the penny stocks, and the declining value of their account as a result of their unsolicited trading, the customers did not heed the advisor’s warning. The advisor informed a compliance officer, who also sent multiple letters to the customers with similar warnings. Then, in mid-2002, the customers lodged a claim seeking damages in the hundreds of thousands of dollars.
Result:
At the FINRA Dispute Resolution hearing on the matter, the Arbitrator reviewed the advisor’s records and the documents and arguments presented by Dochtor Kennedy, MBA, J.D., and she listened to the advisor’s testimony. The Arbitrator noted that the advisor “did not advise any of the purchases, trades, or actions” in the case, that the “Customers’ decisions were all self-directed,” and that the advisor and his compliance officer had “warned the Customers about the dangers of margin trading,” both verbally and in writing. She pointed out that the advisor had essentially “acted only as an order-taker” for the customers and that he had not been involved with the settlement. Additionally, the customer had told the advisor that the claim had been filed as a business decision and that he had done nothing wrong. The Arbitrator found the claim to be false and erroneous, and she granted expungement.
The advisor will soon have a flawless public record for the first time in nearly two decades.
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