FINRA Panel Awards Expungement, Erasing Meritless Complaint Over Unsolicited Outside Investment

• Case Outcome: Full expungement granted; the FINRA Panel ruled the claim "factually impossible," "clearly erroneous," and "false."
• The Allegation: A sophisticated client falsely claimed the advisor recommended a speculative outside real estate debt investment that failed to pay out.
• The Reality: The advisor explicitly disavowed the external investment, urged the client to seek independent counsel, and only managed firm-approved securities for her.
• Respondent Firm: Morgan Stanley (conducted an internal probe and denied the claim as baseless prior to arbitration).
• Legal Standard: Unanimous relief granted under FINRA Rule 2080

A dedicated financial advisor in Melville, New York with an unblemished, 13-year tenure faced a single, unwarranted customer complaint that marred his professional record. Stemming from a client’s independent pursuit of an external real estate venture, the 2024 allegation falsely implicated the advisor in recommending a speculative product outside of his firm’s offerings. Supported by HLBS Law, he pursued FINRA arbitration to expunge the distorting disclosure and reaffirm his commitment to ethical portfolio management. 

In February 2023, the advisor welcomed a 47-year-old business owner as a client through a referral. This sophisticated investor boasted an annual income of $2M–$3M, liquid net worth of $10M, and total net worth of $15M. Her objectives emphasized high returns with moderate-to-aggressive risk tolerance, negligible liquidity requirements, and an investment time horizon exceeding 20 years.

Crafting a diversified portfolio of firm-approved securities, the advisor maintained regular dialogue with the customer regarding her portfolio’s performance. When the client inquired about real estate—unavailable through his brokerage—the advisor clarified his inability to endorse external options. Facilitating an introduction to an outside investment group, the advisor explicitly disavowed any recommendation, urging the client to consult specialized counsel. 

The client independently engaged in a debt investment with the outside group in May 2023, without the advisor’s involvement. By September 2023, the client had disengaged the advisor’s services. In May 2024, she emailed complaints about delayed payments from the outside investment, prompting an August 13, 2024, FINRA disclosure alleging that the advisor had recommended the “outside real estate investment fund” that failed to deliver, seeking $194,000. After a rigorous internal probe, the firm denied the claim on January 27, 2025, deeming it baseless. 

This isolated mark served no regulatory purpose and risked misleading public perceptions of the advisor’s integrity. 

The advisor-initiated expungement proceedings in June 2025. The firm filed a non-oppositional answer in July. Despite proper service, the customer abstained from the December 2025, videoconference hearing in New York. The three-arbitrator FINRA Panel reviewed testimony from a retired FINRA expungement expert and a firm letter affirming the complaint’s lack of merit, alongside other evidence. Unanimously granting relief under FINRA Rule 2080, the Panel declared that “The claim, allegation, or information is factually impossible or clearly erroneous... The registered person was not involved in the alleged investment-related sales practice violation... The claim, allegation, or information is false.” Elaborating, they noted that the advisor “did not recommend the real estate product the Customer purchased or have any further involvement... and had no awareness of the terms,” emphasizing that his role was limited to balancing her portfolio with suitable, firm-sanctioned assets.