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Award Date: October 14, 2022
Hearing Site: Los Angeles, California
Respondent Firm: World Group Securities, Inc.
Claimant Representative: AdvisorLaw
Case Objective:
In 2009, just five years into his career in the industry, this current investment adviser representative (IAR) and then-broker received a customer dispute on his otherwise perfect record at the time. After living with the mark for over a decade, he hired HLBS Law to help him seek expungement through FINRA Dispute Resolution.
Case Summary:
In 2006, a broker who owned a mortgage company sought out our advisor for insurance recommendations. The customer had an annual income of $250,000 and had calculated his monthly discretionary income to be between $3,000 and $5,000. Our advisor reviewed all available insurance options with the customer. The customer selected a variable universal life (VUL) policy so he would be able to have both insurance coverage and cash value that could be allocated to mutual fund subaccounts.
On two occasions, the advisor explained the VUL and all of the policy’s rules and restrictions to the customer using the VUL’s prospectus and approved brochure. The customer received the VUL’s prospectus and reviewed and signed all of its written materials and disclosure paperwork. He then purchased the VUL with $1 million in insurance coverage for the customer and the same amount for the customer’s wife. The customer agreed to a minimum target premium payment of $680 per month, and he began paying $900 per month into the policy. The advisor and customer met regularly to ensure the customer’s understanding of the VUL and that he was on track with its funding.
In 2008, the customer’s mortgage company closed, and he accepted a new position that reduced his annual income from $250,000 to $50,000. As a result, he could no longer afford the minimum monthly premiums for the VUL. He submitted a complaint to the VUL company in an effort to get them to reduce his premiums. That complaint ended up on our advisor’s records as a customer dispute with allegations that he had “misled” the customer regarding his VUL “by leaving out vital details about the product.” The customer sought nearly $18,000 in compensatory damages.
The insurance company agreed to amend the policy and lower the required monthly premium payment to $304 while maintaining the same amount of coverage for the customer and his wife. The customer was satisfied, and he wrote a letter stating that his claim had arisen from a misunderstanding and that the issue had been quickly resolved. He requested that the complaint be removed from the IAR’s records, yet it remained on his CRD and BrokerCheck profiles, as a “withdrawn” customer dispute, for about 13 years.
Result:
While the IAR is no longer with the firm today, the firm did participate in the expungement hearing and did not oppose the IAR’s request for expungement. The customer did not participate in the hearing, and it was shown that he is still a client of the IAR today. The Arbitrator reviewed the documents submitted, including the customer’s letter requesting that the claim be withdrawn, and she listened to the IAR’s testimony and AdvisorLaw’s arguments.
The Arbitrator determined that “[t]he Customer understood and chose the product” and that he “was never actually unsatisfied with the services provided” by the IAR. She pointed out that, “[d]ue to economic hardship, the Customer became unable to afford the monthly payment on his life insurance product. He then did what he thought was necessary to obtain a resolution of lowering his payment to an affordable amount. Once that was accomplished, the Customer wrote a letter withdrawing his claim.” Based on the reasons she pointed out, the Arbitrator recommended expungement, because she had determined that the “claim, allegation, or information is false.”
With this customer dispute soon to be erased from his CRD, IARD, and public BrokerCheck and IAPD profiles, this IAR will be able to move forward with zero customer disputes on his near-20-year record of performance in the financial services industry.
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.
- Juris Doctorate from the University of Denver Sturm College of Law
- Master of Business Administration (MBA) with a major in Finance from the Keller Graduate School of Management
- Bachelor of Science in Business Administration (BBA from the University of Minnesota)
- Former FINRA licenses Series 7, 63, and 55 and former L&H license
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