FINRA Expungement Award:

Maryland Advisor Restores His Disclosure-Free Records With Customer Dispute Expungement


FINRA Expungement Award:

Maryland Advisor Restores His Disclosure-Free Records With Customer Dispute Expungement


 

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Award Date: October 18, 2022
Hearing Site: Baltimore, Maryland
Respondent Firm: Wells Fargo Advisors Financial Network, LLC
Claimant Representative: Doc Kennedy, J.D.


Case Objective:

A Maryland advisor who’s closing in on 30 years in the industry had a sole disclosure on his public records from a customer dispute lodged in 2006. With the help of AdvisorLaw, the advisor obtained a FINRA Dispute Resolution arbitrator’s recommendation for expungement of the claim.


Case Summary:

In 2003, a woman became a customer of the advisor after attending a seminar that he had presented. She opened an IRA and sought protection of her funds. The advisor recommended an Allianz annuity based on the customer’s investor profile, and he explained all of the details and risks of the annuity to the customer. The annuity had a guarantee of principal and allowed for penalty-free withdrawals of up to 10% per year.

The customer purchased the annuity and signed all of the required documents, attesting to her knowledge of its seven-year surrender schedule, the fact that she was purchasing an annuity, and the fact that, while principal was protected, growth was not guaranteed.

Then, in November of 2006, the customer lodged a dispute, claiming that the advisor had told her that she only needed to hold the product for three years, that she was guaranteed growth of 7%, and that she hadn’t known she was purchasing an annuity. She sought damages of just over $10,000.



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The firm found that the advisor had accurately disclosed the annuity’s surrender schedule, that he had provided all disclosures detailing the fees, the he had not offered any guarantee of growth in the annuity, and that he had accurately presented the product as an annuity. Further, the customer had signed the disclosure statement and had received a prospectus and annuity contract. The firm denied the claim, and the customer did not pursue her claim in arbitration or court.

In fact, the customer remained a customer of the advisor until April of 2014. During that time, while the advisor wished to have the disclosure expunged, he was wary of mentioning it to the customer. When he finally did mention it, the customer soon transferred her accounts away from the advisor.


Result:

In the FINRA arbitration hearing, the Arbitrator listened to the advisor’s testimony and the arguments offered by Dochtor Kennedy, MBA, J.D. She reviewed the advisor’s CRD report, the firm’s denial on the report, and the exhibits that had been submitted, which showed that the disclosures had been made to and signed by the customer.

The Arbitrator pointed out that “[the firm had] denied the [customer’s] assertions, based largely on a notice from Allianz, which clearly described the investment as an annuity, and clearly stated the payment period during which there would be a charge for early withdrawal.” She mentioned that “[t]hat notice also provided ten (10) days to reverse the investment” and that “[t]he notice was signed by the Customer in April of 2006.” The Arbitrator also noted that, while “[t]he Customer received notice of the [advisor’s] expungement hearing[, she] failed to appear or make any filings.”

While she stated that “[t]he Arbitrator placed the burden of proof on [the advisor] and recognizes the importance of the CRD report,” the Arbitrator clarified that “an inaccurate and misleading report is of no assistance to FINRA or the investing public.” She confirmed that “the face of the documents contradicts the Customer’s complaint, and fully establishes that it is false, as is required to support expungement.” The Arbitrator also “considered the delay in seeking expungement and credited [the advisor’s testimony] that it was because the Customer remained a customer [of his,] as well as [his] desire to provide good service.” Finally, the Arbitrator stated that “[i]t should also be noted that the investment turned out to be excellent protection during turbulent times, which was precisely what the Customer was seeking and likely why she took no further action.” The Arbitrator concluded that, “[i]n light of the proof provided, the Arbitrator finds that expungement is a proper remedy and will best serve the reporting requirements.”

With the Arbitrator’s recommendation for expungement, this advisor will soon have a perfectly clean public record, after more than 15 years of living with a meritless customer dispute disclosure.

 



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