Fort Worth Advisor’s Customer Dispute With $800,000 Settlement Expunged

• Issue: A $2 million customer claim resulting from a rogue representative’s unauthorized discretion and market volatility.
• Conflict: The firm made an $800,000 “business decision” settlement, leaving the firm’s President with a damaging disclosure on his BrokerCheck® and CRD records.
• Outcome: Full expungement granted under FINRA Rule 2080; the Arbitrator found all allegations to be “clearly erroneous or false.”

After more than 20 years in the financial services industry, a firm President faced a single, meritless customer dispute on his CRD and BrokerCheck records. Seeking to restore his unblemished professional standing, the advisor engaged AdvisorLaw to navigate the complex FINRA Dispute Resolution expungement process.

The root of the disclosure traced back to 1995, when a representative joined the advisor’s family-owned firm. Years later, in 2014, that representative was placed on heightened supervision due to excessive trading and was eventually terminated for continuing to use unauthorized discretion. Following a period of extreme market volatility and a steep decline in the Dow, a group of the representative’s clients filed a claim seeking $2 million in damages.

To avoid the costs and uncertainty of protracted litigation, the firm made a strategic “business decision” to settle the claim for approximately $800,000. Although the advisor did not contribute to the settlement and was not involved in the underlying trades, the settled dispute remained on his permanent record for seven years.

During the expungement hearing, AdvisorLaw’s legal team, led by Dochtor Kennedy, J.D., MBA, and Alex Padla, J.D., presented comprehensive evidence and testimony. They demonstrated that the advisor had no personal involvement in the recommendations and was not responsible for the alleged suitability failures.

Regarding the allegation of a breach of fiduciary duty, the Arbitrator stated that “Based on the investor profiles, stated objectives and instructions made by the Customer, there was reasonable basis to conclude the investments were suitable” and that, “Additionally, [the advisor] was neither involved in the making of the recommendations [ ] nor personally responsible for determining their suitability.” 

She concluded that “No evidence details any failure by [the advisor] to live up to his standard of care, or any failure to honor contract terms with the [ ] family.”

She concluded that “No evidence details any failure by [the advisor] to live up to his standard of care, or any failure to honor contract terms with the [ ] family.”

In addition to determining that the allegations were false or erroneous, the Arbitrator also determined that the advisor had not been involved in the alleged investment-related sales-practice violation. She closed, ordering that the claim “be expunged from [the advisor’s] records and that all Disclosure Reporting Pages accompanying the underlying claim be deleted.”

The Arbitrator concluded that there was no evidence suggesting the advisor failed to meet his standard of care. Consequently, the Panel ordered the total expungement of the claim from the advisor’s records and the deletion of all accompanying Disclosure Reporting Pages (DRPs).