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Award Date: November 9, 2022
Hearing Site: Memphis, Tennessee
Respondent Firm: FSC Securities Corporation, MSI Financial Services, Inc., and SagePoint Financial, Inc.
Claimant Representative: Doc Kennedy J.D.
A Tennessee advisor who began his career in 2000 had acquired three customer disputes between 2005 and 2016. The first was closed with no action, and the second was denied. Yet the third listed a settlement of $45,000 for an allegedly unsuitable recommendation on the advisor’s BrokerCheck and CRD records. He reached out to AdvisorLaw to seek the removal of the disclosures through FINRA arbitration.
In 2005, a couple was referred to our advisor by an insurance agent, specifically to purchase insurance. Our advisor worked with the agent to determine the customers’ profile, and they agreed that a MetLife variable universal life insurance policy, or VUL, was appropriate.
Together with the agent, our advisor explained all of the details of the VUL to the customers. The customers reviewed an illustration, and they signed applications attesting that they were aware of all risks and, specifically, the VUL’s surrender charges.
They purchased the VUL and soon thereafter decided that they wanted to get out of the contract without paying penalties. So the couple complained to MSI, alleging that the advisor hadn’t informed them of the risks and penalties. However, when they learned that the claim had been placed on the advisor’s record, the couple withdrew it. Regardless, the withdrawn claim stayed on the advisor’s records for 17 more years.
The second claim was lodged by an attorney who was in his 70s, who sought to preserve and maximize his estate for the benefit of his heirs. Our advisor recommended an annuity and explained it to the customer in detail. The customer purchased it and was satisfied until his daughter complained that she preferred to receive her inheritance in cash and marketable securities. When the customer inquired about the annuity company, the firm was notified, and the inquiry was flagged as a claim seeking $55,000 in damages. SagePoint investigated and quickly denied the claim, but it stayed on the advisor’s records since 2008.
In 2008, our advisor served as OSJ (Office of Supervisory Jurisdiction) for another advisor. A couple who were clients of that advisor purchased a REIT. They met the suitability requirements and owned the REIT for eight years without raising an issue. Then, in 2016, the couple filed for FINRA arbitration, alleging unsuitability. Not only did their advisor receive a disclosure, but ours also did, too. FSC settled with the couple for $45,000, and while our advisor didn’t have to contribute to the settlement, he still paid the price of having a third disclosure on his records for more than six years.
SagePoint and FSC neither participated in the hearing nor opposed our advisor’s request for expungement. MSI did participate, and it supported the expungement request. The FINRA Dispute Resolution Arbitrator reviewed a slew of documentation, including Statements of Claim and Answers, 187 exhibits, a settlement agreement, and the advisor’s records.
The Arbitrator listened to Dochtor Kennedy, MBA, J.D. argues as to the claims’ lack of merit, and he heard the advisor’s testimony about the events that took place.
Regarding the first claim, the Arbitrator mentioned that the couple had “said that the complaint was not about [our advisor] and arose after he had left the brokerage firm.” He pointed out that, “When the customers learned that their complaint ended up on the [advisor’s] record[, ] they withdrew the complaint.” Finding that our advisor had not been involved in the alleged violation, the Arbitrator deemed the claim false and recommended expungement.
For the second claim, the Arbitrator noted that “While it appears that the customer had a question on his investment and may have been unhappy, there was no wrongdoing on the part of [the advisor,]” he mentioned that “the customer’s daughter was not happy with the investment…and the customer did not withdraw his account [ ] and continued to have a good relationship with [the advisor].” Therefore, the Arbitrator found that the allegations were false.
In regard to the third dispute, the Arbitrator acknowledged that “The case was settled with the brokerage firm to avoid the costs of litigation, and [our advisor] admitted no liability or guilt.” He pointed out that our advisor testified “that the allegation of unsuitability by the customers was false, as the customers were suitable for the investment and agreed to it and eight years went by before [they] claimed it was unsuitable.” The Arbitrator concluded that not only were the allegations false, our advisor was not even involved.
With a recommendation for the expungement of all three customer disputes and no other disclosures on his record, this advisor completely cleaned up his public record in one fell swoop — with the help of AdvisorLaw.
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.
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