- 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
- Newly Registered RIAs Under Increased Scrutiny
*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: December 22, 2022
Hearing Site: New York, New York
Respondent Firm: Josephthal & Co., Inc. and Nichols, Safina, Lerner & Co. Inc.
Claimant Representative: Doc Kennedy, J.D. and Harris Freedman, J.D.
More than 30 years into his career in the industry, this Boca Raton-based advisor had two customer disputes that had plagued his records since the 1990s. Seeking to once again be able to boast a perfect public record, this advisor hired AdvisorLaw to help him seek expungement of the disclosures through FINRA Dispute Resolution.
The first dispute arose from a couple who had been clients of the advisor’s partner in the early 1990s. While the advisor shared a representative number with his partner, he never met nor worked with the customers or their accounts in any way — the advisor’s partner managed the entire client relationship.
When the advisor’s partner and the customer had a disagreement, the customer and their attorney wrote a complaint about a few stocks that had declined, among a diversified portfolio that had performed well overall. The customers then went so far as to file for arbitration with FINRA’s predecessor, the National Association of Securities Dealers (NASD). Because he shared a split production number with his partner, our advisor was named as a respondent to the filing, and he received a disclosure on his records. Josephthal settled with the customers for $30,000, and our advisor allowed the firm to keep his commissions, effectively contributing approximately $4,400 to the settlement.
The next dispute was lodged by a man who our advisor had met while researching a company in which he had invested. Someone at that company asked our advisor to speak to one of the company’s employees about the company’s stock. Our advisor spoke to the employee and ascertained that the employee wanted to invest aggressively for speculation and to maximize profits.
Together, our advisor and the customer built a portfolio that provided profitable returns. One of the positions in the portfolio increased dramatically and provided the customer with a profit of over $1 million, which was enough to allow him to retire.
In 1996, our advisor changed firms. The customer kept his accounts at a previous firm, but the two stayed in touch due to the success that they had had investing together. Subsequently, the customer opened an account with our advisor at his new firm, Nichols, Safina, Lerner (NSL), directed the purchase of a single stock, and wired the funds for the purchase.
Soon thereafter, the company behind that stock reported negative news, and the stock declined significantly. The customer’s son demanded that our advisor cancel the trade, which he was unable to do. The customer then wrote a letter claiming that the purchase of the stock had been unauthorized. NSL investigated and denied the claim, but it remained on our advisor’s records from November 1997 forward.
Neither of the firm respondents filed statements of answer in response to our advisor’s statement of claim for the FINRA arbitration hearing, and neither the firms nor the customers participated in the hearing. The Arbitrator reviewed the documents and exhibits submitted, and she listened to the advisor’s testimony and Doc Kennedy, MBA, J.D.’s and Harris Freedman, J.D.’s arguments.
Regarding the first dispute, the Arbitrator pointed out that “only [the advisor’s] partner handled the customer’s account” and that “The customer received reports after each trade as well as regular reports.” She noted that “[Josephthal] owed [the advisor ] commissions; and promised it would leave [him] out of the arbitration in exchange for his final commission payment.” Additionally, she mentioned that the settlement “was a small price to pay to avoid a legal battle.” The Arbitrator recommended expungement, stating that the advisor “was not involved in this matter and, worse, lost his commission in exchange for a false promise.”
In the second matter, the Arbitrator mentioned that “The customer never brought concerns before this complaint which was a surprise to [the advisor]” and that “The customer’s son, who did not have power of attorney and did not get along with [the advisor], made the complaint.” The Arbitrator concluded that “Since the money [to make the allegedly-unauthorized purchase] had been wired to the account [by the customer], the claim was clearly meritless,” and she recommended expungement.
Soon this advisor will have pristine public records once again and for the first time in 30 years, thanks to 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.
- 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