- Breaking Away: The Myths And Realities Of Leaving A Wirehouse
- SEC’s Cybersecurity Rule: What RIAs & Funds Need To Know
- What events will trigger a FINRA inquiry?
- FINRA’s Rule 4111 & New “Restricted” Label On BrokerCheck
- Boca Raton Advisor Expunges Four, 20-Year-Old Disclosures
- Massachusetts Advisor Clears Record Of U5 Termination
*If you’re under FINRA or SEC investigation, or if you have a meritless disclosure on your BrokerCheck, CRD, IARD, or IAPD record, call us right now at (303) 952-4025 to talk with an attorney and receive a priority consultation at no charge.
Award Date: September 8, 2022
Hearing Site: Denver, Colorado
Respondent Firm: Geneos Wealth Management, Inc.
Claimant Representative: Michael Bassette, J.D.
In September of 2020, more than 30 years into his career as a financial services professional, a Colorado advisor was slapped with a customer dispute disclosure. The dispute had been settled for $40,000, and the disclosure listed allegations of misrepresentation, negligence, and unsuitability, among others. The advisor hired HLBS Law to attempt to have the disclosure expunged through FINRA arbitration.
In 2011, a longtime family friend of our advisor passed away. The friend’s wife was left with life insurance proceeds and other assets, and she needed financial guidance. She sought help from our advisor and became a customer of his. The customer had a net worth in excess of $1 million, a moderately-high risk tolerance, and a long-term investment time horizon. Specifically, she sought income from her investments.
Based on the customer’s investor profile, our advisor recommends various investments, including mutual funds, a variable annuity (VA), and dividend-paying real estate investment trusts (REITs). He explained all of the details of the investments to her and provided her with the investments’ written materials.
In April of 2013, the customer chose to invest $50,000 in each of three REITs, for the monthly income that the REITs provided. She completed paperwork attesting to the REITs’ suitability, as well as her knowledge of all details and risks.
In November 2015, the customer invested $185,000 in a VA for the monthly income it provided, as well as for its guarantees, principal protection, and death benefits. As with her REIT investments, the customer signed documentation attesting to the VA’s suitability and her knowledge of all of its details and risks.
Then, five years later in August of 2020, the customer filed for FINRA arbitration against the firm, seeking more than $75,000 in damages. She did not name our advisor in the complaint.
By November 2020, between distributions and the REITs’ current values, the customer had gained more than $56,000, collectively, from her REIT investments. Between the income provided by the VA and its current value at that time, the customer was up $20,000 on her VA investment, while maintaining a guaranteed death benefit of approximately $220,000.
In September 2021, after conducting an investigation and finding no merit to the customer’s claims, the firm settled with her approximately half of the damages sought.
The firm participated in the advisor’s FINRA Dispute Resolution hearing but did not oppose expungement. While the customer did not participate in the hearing, she did submit an 11-page document opposing the expungement of her claim. The Arbitrator reviewed our advisor’s records and written submissions, as well as the document submitted by the customer. Additionally, the Arbitrator heard arguments in support of our advisor from Michael Bessette, J.D.
The Arbitrator determined that “[a]ll of the evidence presented showed that … the three [REITs] had good long-term track records, and the annuity was suitable for the [c]ustomer’s investment objectives of long-term growth and income.” She noted that the customer had a “moderately high-risk tolerance and a need for income because she had recently been widowed.” The Arbitrator found that the advisor and firm “did due diligence before recommending these investments to the [c]ustomer,” that our advisor “met frequently with the [c]ustomer,” and that he had “thoroughly explained these investments to the [c]ustomer.” Regarding the customer’s claims, the Arbitrator noted that “[n]o credible evidence was presented [to indicate] that [our advisor] was either negligent or that he made any misrepresentations to the [c]ustomer.” She also pointed out that “[t]he investments performed as expected.” For those reasons, the Arbitrator concluded that “expungement is appropriate because the claims were clearly erroneous and false.”
Soon, our advisor will no longer have to live with the damaging effects of a negative, settled customer dispute by a customer who profited from his recommendations.
If you’d like to learn more about AdvisorLaw’s FINRA Disclosure Expungement services, please fill out the contact form below. Our consultations are complimentary, and our services were created exclusively for financial advisors.
- What events will trigger a FINRA inquiry? - May 23, 2023
- FINRA’s Rule 4111 & New “Restricted” Label On BrokerCheck - May 18, 2023
- Boca Raton Advisor Expunges Four, 20-Year-Old Disclosures - May 15, 2023