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Award Date: May 15, 2023
Claimant Representatives: AdvisorLaw
Respondent Firms: Wells Fargo Advisors Financial Network and JWGenesis Securities, Inc.
Case Objective:
In the five-year period between 1997 and 2002, this 35-plus-year veteran advisor in Boca Raton, Florida amassed five customer dispute disclosures on his CRD and public BrokerCheck records. After living with the marks for two decades, he hired AdvisorLaw to try for expungement through FINRA Dispute Resolution.
Case Summary:
A client who joined our advisor in the late 1990s at JWGenesis received the firm’s monthly mailers. Those mailers contained stock recommendations from a bank analyst. For several months in a row, NAL Financial stock was on the monthly mailer list.
In the following months, the price of the stock declined from approximately $14 to approximately $6, and the investor requested a prospectus from our advisor. He then directed the purchase of NAL stock with approximately six percent of his portfolio, at $6 per share. Following his purchase, the stock declined below $6 per share, and the investor lodged a claim of unsuitability. The firm denied the allegations.
The second investor also purchased NAL stock at around $6 a share, and when it dropped below $6 a share, he, too, complained of unsuitability. JWGenesis denied that investor’s claim, as well.
The third complainant became a client of our advisor in the early 1990s. Our advisor recommended various investment options, including preferred stocks and corporate taxable bonds. The investors, however, purchased high-yield, speculative bonds. They received trade confirmations and monthly statements reflecting the securities’ speculative nature. Around 1997, the investors consolidated their accounts with an outside broker and ceased to be clients of our advisor. One of the bonds that they had purchased prior to moving their accounts subsequently defaulted. In mid-1999, the investors alleged misrepresentation and unsuitability and sought $8,500 in damages. As a nuisance claim, JWGenesis settled with the investors for $6,000.
The fourth investor was in his 70s when he became our advisor’s customer in late 1995. The investor granted trading authority in his accounts to a friend of his. He also watched CNBC daily and directed unsolicited purchases of equities discussed on the programs. The trades were consistent with the investor’s investor profile, and he signed numerous documents in connection with the purchases. In addition to equities, the investor purchased preferred stocks and a variable annuity. He received confirmations of every trade made in his accounts, as well as monthly statements. In 2002, after his equities and variable annuity declined in value amid the market chaos of 2000-2002, the investor filed for FINRA arbitration, alleging unsuitability and excessive trading. He sought a whopping $640,500 in damages, and the firm settled with him for $190,000.
Result:
JW Genesis did not file a statement of the answer to the advisor’s Statement of Claim for FINRA arbitration, nor did it participate in the hearing. Wells Fargo Advisors opposed the advisor’s request for damages, though it participated in the hearing and took no position on the advisor’s request for expungement. None of the customers participated.
The Arbitrator examined the documents submitted and listened to the advisor’s testimony and AdvisorLaw’s arguments in favor of expungement.
In brief explanations, the Arbitrator recommended the expungement of all four of the disputes at issue.
Regarding the first and second claims, the Arbitrator mentioned that the advisor “did not solicit the transaction at issue, and the investment[s were] suitable when made based on [the customers’] investor profile and questionnaire.”
When explaining his reasoning for expunging the third dispute, the Arbitrator mentioned that, at the time when the investment was made, “it was suitable pursuant to [the investors’] profile and investment history, which included investment in high-yield speculative bonds.” He also mentioned that the customers “were active investors, and all investments were authorized by them.”
Regarding the last dispute, the Arbitrator pointed out that the recommendation “was suitable at the time of investment based on [the customer’s] investor profile and investor history[,]” and that “Most of the trades were generated by [the customer] and were unsolicited[,]” and that the customer “watched CNBC and was an active trader.”
After 20 years of living with a stack of customer dispute disclosures on his records, this advisor will soon enjoy the benefit of a CRD report and public BrokerCheck profile that’s reflective of his dedication to his career and clients.