FINRA Form U5 Expungement Award:
Daytona Beach Advisor Removes Termination Disclosures
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Award Date: September 29, 2022
Hearing Site: Orlando, Florida
Respondent Firm: First Allied Securities, Inc.
Claimant Representative: Harris Freedman J.D.
Fifteen years into his career as a financial advisor, this registered rep was terminated by his firm for allegedly failing to inform the firm of a customer arbitration in a timely manner. To make matters harsher for the advisor, the firm filed not one, but two, Forms U5, and the advisor ended up with two separate disclosures on his record. He hired HLBS Law to seek expungement of the disclosures through FINRA Dispute Resolution.
The advisor joined the firm in October of 2007. About three years later, a doctor became a customer of the advisor. The doctor soon referred many more doctors and other individuals to the advisor. The doctor and those whom he referred to the advisor were all interested in purchasing an AEI Fisker private placement investment — which they sought to do through the advisor on an unsolicited basis.
The advisor met with the customers to gather information regarding their investor profiles and ensure that each was suitable for purchasing the Fisker private placement. The advisor explained all of the details of the investment to the customers, who were also provided with approximately 50 pages of disclosures for the investment. All of the customers signed documents attesting to their status as accredited investors and acknowledging all disclosures.
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When discussing the investment with the customers, some of the facts were relayed via text. The advisor had no knowledge of any firm policy prohibiting such communications. In 2011, the customers purchased the Fisker investment. All but one made no other investments through our advisor. Following a production event, the government pulled Fisker’s funding, and the customers lost money from their investments.
They then teamed up and filed for FINRA arbitration, alleging all kinds of sales-practice violations on the part of the advisor and seeking nearly $3 million in damages. In the process of discovery, the firm obtained the texts between the advisor and the customers. It later settled with the customers, and the matter was dismissed. However, two months following the settlement, the firm terminated the advisor. The advisor went another eight years with two termination disclosures on his records.
The arbitrator reviewed the documents submitted in the hearing and listened to testimony by the advisor and arguments by Harris Freedman, J.D. Upon examining all of the facts, the arbitrator determined that the two Forms U5 should be amended to reflect a “Voluntary” reason for termination and that the termination explanations should be deleted in their entirety and appear blank.
Once confirmed with a court of competent jurisdiction, the CRD will no longer hold any reference to an involuntary termination or any allegations against the advisor in connection with the disclosures.
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