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Award Date: June 3, 2023
Hearing Site: Houston, Texas
Respondent Firm: Wells Fargo Clearing Services, LLC
Client Representative: Dochtor Kennedy, MBA, J.D.
In 2008, a near-30-year veteran of the industry in Texas with an otherwise-perfect record received two customer dispute disclosures related to the financial crisis at the time. In hopes of achieving expungement under the current FINRA Dispute Resolution process, she hired AdvisorLaw to guide her through arbitration.
The first dispute was lodged by an investor who became a customer of our advisor around 2007. The investor was seeking investments that were more growth-oriented than her savings account and CDs.
Our advisor recommended a variety of diverse investments that included a unit investment trust (UIT). She explained all details to the investor and provided all the necessary written materials. The investor purchased the UIT in December 2007 and spoke to our advisor regularly until June 2008, when our advisor left the firm, and the investor’s account was assigned to a new advisor.
In October 2008, less than a year after the investment and about a month after the financial crisis set in, the investor lodged a claim alleging that she had not authorized the UIT investment. As she clearly had authorized the investment, the firm denied the claim. But our advisor received a disclosure that sat on her record for 15 years.
The second investor also became a client of our advisor around 2007. He had significant experience investing in mutual funds. In September 2007, the investor purchased a Franklin Templeton U.S. Government Money Fund on an unsolicited basis. Our advisor was not involved with the recommendation or any representations regarding the fund, and she left the firm in June 2008.
Then in November 2008, after the Franklin fund had declined for a few months amid the financial crisis, the investor lodged a claim alleging that our advisor had made false statements about the Franklin fund. Despite the fact that she had made no statements whatsoever, the customer dispute was reported to our advisor’s public BrokerCheck and CRD records after the firm settled with the customer for $5,700.
Wells Fargo participated in the advisor’s expungement hearing and did not oppose her request for expungement. Neither of the Customers elected to participate. The FINRA Arbitrator reviewed the documents and evidence submitted. He heard arguments presented by Dochtor Kennedy, MBA, J.D., and listened to the advisor’s testimony, as well.
Regarding the first dispute, the Arbitrator stated that “The security which was recommended to the customer and purchased by her was authorized by the customer” and that “Confirmations and account statements were provided to the Customer…”
For the second matter, the Arbitrator noted that our advisor had “made no recommendation to the customer to purchase the subject security” and that the purchase “was made as an unsolicited transaction at a time the fund was closed to initial purchases and could only have been purchased through an exchange of shares or units in other Franklin Templeton funds.” He went on to point out that “the customer had previously held a Series 6 license and sold mutual funds professionally.”
With the Arbitrator’s recommendation for the expungement of both disclosures from our advisor’s records, our advisor will soon have a record free of customer dispute disclosures for the first time in 15 years.
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