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Award Date: June 16, 2023
Claimant Representative: AdvisorLaw
Respondent Firm: Citigroup Global Markets Inc.
Case Objective:
An advisor out of Laguna Niguel, California had a perfect BrokerCheck record — aside from two customer disputes from nearly two decades prior. In hopes of achieving expungement through FINRA Dispute Resolution, she hired AdvisorLaw to bring her through the arbitration process.
Case Summary:
The first customer dispute on our advisor’s records came from a couple who became her clients in the late 1990s. They were in good health and had a surplus of funds that they wanted to invest for growth, with moderate risk tolerance. They owned money market funds, municipal bonds, and equity mutual funds. Our advisor made several recommendations, including an annuity with living and death benefits. The couple purchased the annuity for $100,000 and spoke regularly with our advisor for the next several years. In 2000, they took a withdrawal of approximately 15% of the policy value. The annuity’s value declined amid the market turmoil of the early 2000s, and the couple lodged a claim in 2003, alleging that the advisor had failed to follow instructions. They sought compensatory damages of $50,000, and the claim was closed with no action taken.
The second claim was from a client who joined our advisor in the mid-1990s. The client opened two brokerage accounts with the goal of generating after-tax income of $30,000 annually by retirement. The client chose to use a buy-and-hold strategy that her father used with individual stocks. Our advisor recommended a mutual fund strategy that would provide more diversification, and the client invested. Upon implementing the strategy, however, the client tended to focus on more short-term performance, rather than her stated approach of buy-and-hold. Over time, she desired to assume more risk, and she complained that her portfolio wasn’t growing fast enough. She then switched financial advisors within the firm twice, and in 2004, the client alleged unsuitability and breach of fiduciary duty, naming all three advisors that she had had. The firm denied the claim, but it sat on our advisor’s records for 19 years.
Result:
The firm participated in the expungement hearing and did not oppose our advisor’s request. The Arbitrator reviewed all documents submitted and listened to the advisor’s testimony, as well as the arguments presented by AdvisorLaw.
For the first matter, the Arbitrator stated that “it is clear that there were no misrepresentations or any failure to follow customer’s instructions,” and he stated that the advisor had “made suitable recommendations and did not breach any fiduciary duties” in the second matter. The Arbitrator noted that our advisor had “demonstrated that she was very thorough and diligent with each customer” and that “each customer complaint that their investment had declined in value were clearly reactions to major events such as the 9-11 attack which were beyond the knowledge or control of [our advisor].
The Arbitrator recommended the expungement of both claims, which means that she will soon have a perfect record again, for the first time since the early 2000s.