A three-member FINRA Panel granted expungement of an unsuitability and fiduciary-duty claim tied to GWG Holdings bonds from a California advisor’s CRD record, even though California’s state securities regulator appeared at the hearing to argue against it. The Panel found the allegations false. It noted that the customers were highly sophisticated accredited investors who received the prospectus with each purchase, were told the risks on multiple occasions, and held the bonds as about 1.68% of their investable assets. The Panel also rejected the regulator’s position that a high-risk investment is inappropriate for anyone who calls their risk tolerance “moderate,” as applied to accredited investors like these.
Key Facts
Outcome: expungement granted under FINRA Rule 2080, September 23, 2026 Allegation: an unsuitable, high-risk recommendation and breach of fiduciary duty, tied to GWG L Bonds
Respondent firm: Centaurus Financial, Inc., which did not oppose expungement
Opposition: one customer submitted a written statement, and California’s state securities regulator submitted a statement and appeared at the hearing to argue against expungement
The claim was filed in April 2024, more than two years after the advisor left the firm.
The disclosure reflected $230,000 in alleged damages because the firm reported it together with an unrelated $80,000 claim
The firm settled in April 2025 for $73,000 as a business decision. The advisor was not consulted, did not contribute, and never saw the settlement agreement
Panel: three public arbitrators, videoconference hearing
What the customers alleged
In April 2024, a retired couple filed a FINRA arbitration claim against the advisor’s former firm, alleging an unsuitable, high-risk recommendation and breach of fiduciary duty. They filed more than two years after the advisor left the firm, and after GWG Holdings, the issuer of the bonds, suspended interest payments two months after the advisor moved to another firm in November 2021 and then filed for Chapter 11 bankruptcy in April 2022.
The firm reported the claim to the advisor’s CRD record together with an unrelated $80,000 claim, so the disclosure reflected $230,000 in alleged damages. In April 2025, the firm settled for $73,000 as a business decision. The advisor was not consulted, did not contribute to the settlement, and never saw the agreement.
The investment and the customers
The advisor entered the industry in August 2007 and joined Centaurus Financial in Monterey, California, in July 2013 as a registered representative and investment adviser representative. He worked as part of a two-person advisory team. In November 2017, the couple became clients after attending a financial planning seminar the team hosted at a local college.
The couple was highly experienced, sophisticated investors with substantial net worth and decades of experience across real estate, mutual funds, annuities, stocks, bonds, and alternative investments. With interest rates low, they were looking for income-producing alternatives. In March 2019, they bought two $50,000 GWG L Bonds, one 5-year and one 7-year, after the team walked them through the terms, risks, costs, and illiquidity. They signed subscription and disclosure documents and received the prospectus, which described the bonds as speculative and high-risk. In June 2020, they bought a third $50,000 bond on an unsolicited basis. Altogether, the bonds were about 1.68% of their investable assets.
What the Panel found
The firm did not oppose expungement. One customer submitted a written statement opposing it, and California’s state securities regulator submitted a statement and appeared at the hearing to argue against it. After a videoconference hearing, the three-member Panel of public arbitrators granted expungement, finding that the allegations were false.
The Panel found that the complaint was motivated by market loss and that the fiduciary duty allegation was a different theory of recovery built on the same suitability complaint. It acknowledged that the bonds were high-risk and illiquid, but emphasized that the couple were highly sophisticated accredited investors with substantial net worth. They received the prospectus with each purchase, and both the advisor and his colleague, a Certified Financial Planner, explained the risks to them on multiple occasions. The investment was a small fraction of their liquid assets, and GWG’s later collapse was not reasonably foreseeable when they bought. The Panel also credited expert testimony that the settlement was a nuisance settlement driven by defense costs.
The Panel directly rejected the regulator’s position that a high-risk investment is inappropriate per se for anyone who describes their risk tolerance as “moderate.” It agreed that the principle holds for the general retail customer, but not for accredited investors like these, whose high-risk exposure was minimal relative to their net worth and liquidity. It concluded that the advisor had fully satisfied the applicable know-your-customer rules, including FINRA Rule 2111 (suitability), and ordered all references to the occurrence expunged from his CRD record.
What Advisors Can Take From This
A claim filed after you leave a firm can still end up on your record, even when the firm settles without consulting you. Here, the Panel weighed how sophisticated the customers were, what they signed and received, how much of their assets the investment represented, and how the risks were explained. Advisors should be able to show each of those.
Frequently Asked Questions
Can a claim be expunged if the state securities regulator opposes it?
In this case, yes. California’s regulator appeared at the hearing and argued against expungement, and the Panel still granted it after finding the allegations false. Each case depends on its facts.
Is a high-risk investment unsuitable for a customer with a moderate risk tolerance?
The regulator argued it is, per se. The Panel agreed that principle holds for the general retail customer, but not for accredited investors like the ones in this case, whose exposure was small relative to their net worth and liquidity.
Can a claim filed after an advisor leaves a firm still appear on his record?
In this case, the customers filed more than two years after the advisor left, the firm settled without consulting him, and the disclosure was on his CRD record until the Panel ordered it expunged.
Results depend on the facts of each case and are not a guarantee of a similar outcome. An arbitration award granting expungement generally must be confirmed by a court before FINRA removes the information from the CRD system.
Is a Settlement You Didn’t Agree To on Your Record?
If a customer dispute that settled without your input is still showing on your CRD or BrokerCheck record, it may be worth finding out whether expungement is an option. Every case is different, and results can’t be guaranteed.
