FINRA U5 Expungement Award:

Veteran Advisor In Colorado Expunges Termination Disclosure

 

FINRA U5 Expungement Award:

Veteran Advisor In Colorado Expunges Form U5 Termination Disclosure

 

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Award Date: September 15, 2021
Hearing Site: Denver, Colorado
Respondent Firm: LPL Financial LLC
Claimant Representative: Harris Freedman, J.D.

Media Coverage: AdvisorHub Article and Financial IQ Article


Case Objective:

A Colorado advisor who has worked in the financial services industry for more than two decades sought to expunge a five-year-old Form U5 termination disclosure. The alleged violation published was related to an infraction of firm policy concerning loans.


Case Summary:

Over the course of his seven years with the firm, the advisor both made loans and received loans from friends and family. The three loans that he received over the years were from his father-in-law and two friends. The father-in-law and one friend held accounts with the firm, and the other friend did not. None of the accounts were involved with the loans, and the advisor repaid all of the loans in full and in a timely manner. No customers were harmed or complained.


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However, one bullet point in the firm’s 251-page compliance manual indicated that the advisor was required to obtain permission from the firm before accepting any loans. The advisor did not recall that particular bullet point and did not realize that he was required to obtain advance permission. The firm questioned him about the loans, he answered truthfully, and he was terminated for a violation of firm policy.


Result:

The FINRA Arbitrator read the materials provided at the hearing and listened to testimony. She found the advisor’s testimony to be credible, determined that the information in the disclosure is defamatory in nature, and recommended expungement. In her findings, the Arbitrator specifically mentioned that “[w]hile Associated Persons are expected to know and follow all the rules in their brokerage’s compliance manual…[the advisor] was not aware of this rule when he received the loans and he did not intentionally violate the rule, which was buried in a 251-page [c]ompliance manual.”

The Arbitrator stated that allowing the information to remain on the advisor’s records “would serve no regulatory purpose.” The advisor may now continue his career with his record free of the published Form U5 termination.




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