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Award Date: July 20, 2023
Claimant Representative: HLBS Law
Respondent Firm: J.P. Morgan Securities LLC
Case Objective:
A Florida-based financial advisor who has been in the industry for more than two decades had one settled customer dispute disclosure on her CRD and public BrokerCheck record. In an effort to clear her record before the new FINRA Dispute Resolution criteria take effect, the advisor hired HLBS Law to lead her expungement effort.
Case Summary:
In January 2014, an investor became a client of our advisor when his previous advisor left the firm. He was an experienced, high-net-worth investor in his 80s. Our advisor made recommendations of investments that were appropriate for the investor’s profile.
In November 2014, the investor met with our advisor. He told her that he was dissatisfied that an annuity he owned had declined in value. Our advisor explained that the annuity subaccounts could fluctuate, though the investor’s annuity had in fact increased in value by nearly $200,000 since inception. After discussing the annuity with our advisor, the investor chose to liquidate it. Our advisor recommended that he consult with a tax professional regarding any tax consequences. The investor chose not to have any taxes withheld from the annuity surrender, and he acknowledged all fees and charges that would apply.
The investor placed approximately half of the proceeds into his self-managed account with Fidelity, and he placed the remaining proceeds into four managed accounts. The managed accounts were diversified among several asset classes and market sectors, and they provided the investor with a growth-oriented portfolio that was consistent with his desire to grow his investments and his aggressive risk tolerance. During the approximate one-year relationship with our advisor, the investor’s accounts grew by nearly $50,000.
Around the end of 2014, the investor’s previous advisor encouraged his former clients to send complaint letters to the firm. In December 2014, our advisor was hit with a claim by the investor and his daughter. The firm denied the claim. In February 2015, the investor lodged a second claim, which was also denied. Then in April 2016, the investor and his daughter filed for FINRA arbitration, alleging unsuitability regarding a managed account investment in 2014. For strictly business reasons, the firm settled the claim for just over $70,000. Our advisor did not contribute to the settlement, but she was stuck with a settled disclosure on her records for the next six years.
Result:
Neither the firm nor the customer participated in our advisor’s expungement hearing. The Arbitrator reviewed the claim and documentation provided by our advisor, including the settlement agreement with the investor and several meeting memos regarding our advisor’s discussions with the investor. He listened to our advisor’s testimony, as well as the arguments presented by HLBS Law.
Determining that the customer’s claim was false, the Arbitrator mentioned that “The evidence presented showed that the Customer had numerous face-to-face meetings with [our advisor,] during which the risks and costs of [the investor’s] decisions were discussed fully. In addition, the Customer signed numerous documents which stated the risks and costs of these investments.”
With the FINRA Arbitrator’s recommendation for the expungement of the one disclosure on our advisor’s record, she will soon have a perfect public BrokerCheck and CRD profile.