Four Disputes Expunged For Investment Adviser

This LA-based investment adviser and former broker had amassed four customer disputes on his public BrokerCheck record since he began his career in the industry in 1996. Hoping to clean up his public profile, he hired AdvisorLaw to bring him through FINRA’s Dispute Resolution process.

The first dispute was lodged in mid-2001. The customer, who had become a client of the advisor just two years prior, lodged a claim alleging that the advisor’s recommendations were unsuitable, due to their poor performance at the time. She filed for FINRA arbitration and was awarded a mere $1,500. The advisor was not required to contribute to the award amount.

In March 2023, just as the advisor was planning to resign for a new role with Merrill Lynch, he was abruptly terminated for alleged poor performance, including claims of inaccurately documenting client interactions and misusing planning tools. These allegations were added to his Form U5 filing, though no client harm or complaints were noted. The advisor challenged the termination and its handling, expressing concerns about his supervisor’s conduct. Nevertheless, he has been living with the scar of a termination disclosure on his CRD and BrokerCheck records ever since.

The third customer dispute was also lodged in mid-2004, after a couple who had completed a Section 1035 exchange of an old annuity for a new annuity. The exchange did not result in any tax implications, and the advisor spoke to the customers regularly. However, when the value of their portfolio declined amid market volatility in 2003, the customers alleged that they had been subject to taxes due to the annuity exchange. The firm denied the claim, finding the allegations to have no merit.

The fourth customer dispute on the advisor’s record, lodged in late 2004, was a result of the illiquidity of an auction rate security (ARS) that the advisor had recommended to the customers in 2007. After the auctions supporting ARSs failed in 2008 and 2009, the customers alleged misrepresentation, unsuitability, and high losses. The firm denied this claim, as well, and the customers did not pursue it further.

WaMu did not file an answer in response to the advisor’s Statement of Claim for FINRA arbitration. Citicorp and UBS filed answers, wherein they did not oppose the advisor’s request for expungement of the claims. 

The FINRA Arbitrator heard the arguments in favor of expungement that were presented by Peter Lindholm, J.D. and she listened to the advisor’s testimony. 

Regarding the first customer dispute, the Arbitrator noted that the customer “would complain when the markets were not performing well” and that her “personal feelings about [the advisor] influenced her decision to complain about the performance of her portfolio.”

When assessing the facts underlying the second claim, the Arbitrator pointed out that, when the customer’s “CPA incorrectly hold her that the withdrawal would result in a tax implication,” she “verbally lodged a complaint with Citicorp[.]” Additionally, the Arbitrator added that “Because the annuity’s $1,000.00 minimum death benefit remained intact following the withdrawal, the withdrawal did not result in any tax implication” and that “The CPA later admitted to making an error[.]”

The Arbitrator found that the allegations of the customers who had lodged the third claim had no merit, because “[the customers had] received full disclosure from [the advisor] regarding any issues associated with the 1035 exchange, including that it would not be subject to taxes.” She mentioned that “The exchange was also approved by WaMu’s compliance department and [the advisor’s] manager and regional director” and that “WaMu, after an investigation, denied [the customers’] claim” and that “[the customers] did not pursue [it] further in court or arbitration.”

Regarding the fourth customer dispute, the Arbitrator found that UBS had found “that it was unprecedented market events that led to the breakdown of liquidity in the market for ARSs” and that, “In addition, [the customers] were made whole.” 

With the Arbitrator’s recommendation for the expungement of all four customer disputes, this investment advisor will soon have a much cleaner record, free of any customer dispute disclosure.

Facing a similar situation? Contact our team today for a complimentary consultation to evaluate your case. Our experts will assess the viability of expungement and guide you through the process.