Idaho Advisor’s Customer Dispute Disclosure With $295,000 Settlement Expunged

Award Date: September 4, 2024
Claimant Representative: Alex Padla, J.D., HLBS Law
Respondent Firm: Cambridge Investment Research, Inc.

Case Objective:

About 12 years into his career in the financial services industry, this Idaho-based advisor’s perfect record was stained by a customer dispute with serious allegations and a settlement of nearly $300K. Wanting to try his chance at expungement of the claim in FINRA Dispute Resolution, the advisor hired HLBS Law. 

Summary:

Around 2012, an investor became a client of the advisor. The investor was wary of the stock market and consistently sought alternative investments. He held an equity and bond portfolio with Edward Jones and told the advisor that he was only interested in investments he could not purchase through Edward Jones. 

The customer repeatedly requested to invest in Atlas Growth Partners Limited partnership, which was an oil and gas investment. After conducting due diligence, both the advisor and the firm deemed it prudent for the customer to invest a small portion of his overall portfolio in Atlas. The customer purchased Atlas, and the advisor received a fee, as dictated by Atlas. The customer signed copious documents attesting to his understanding of the investment and specifically its fee structure. Following the purchase, the customer received regular dividends from Atlas, while continuing to invest in other alternative investments. 

In late 2015, OPEC declined to decrease its oil output in response to global market trends, ultimately contributing to a decline in oil prices. To make matters worse, many oil and drilling investments underperformed or ceased operations during the COVID-19 pandemic. In mid-2021, Atlas notified investors that it planned to dissolve and terminate the partnership. In the end, the customer felt that he did not receive the return that he had hoped from Atlas, and he filed for FINRA arbitration. The advisor was hit with a customer dispute alleging that he had recommended Atlas for generating high commissions and fees. Cambridge settled with the customer for $295,000.

Resolution:

Cambridge did not oppose the advisor’s request for expungement, though it did assert various affirmative defenses in response to the advisor’s Statement of Claim for arbitration. The FINRA Arbitrator read all pleadings and other materials filed by the parties to the matter. She also listened to the advisor’s testimony and the arguments presented on the advisor’s behalf by Alex Padla, J.D., HLBS Law.

In her award, the Arbitrator noted that “The Customer came to see [the advisor] and asked him about Atlas[.]” She pointed out that the advisor “provided the Customer with Atlas prospectuses and discussed the risks and rewards possible with investing in them.” The Arbitrator mentioned that the advisor had explained to the customer that “to invest in companies such as Atlas, an investor must demonstrate that his net worth exceeds $1 million and that the investor is well-educated” and that “The Customer did so.”

The Arbitrator concluded that “Because [the advisor] never invested [Cambridge’s] money in Atlas, it is factually impossible that the Customer’s complaint against him stemmed from [his] advice or investment” and that, “For the same reason, the Customer’s complaint is false.” Furthermore, “The Customer did not realize that he was filing a FINRA claim against [the advisor], tried to ‘un-sue’ [him] three times, and remains [his] customer.”

Thanks to the efforts of Alex Padla, J.D., and the Arbitrator’s award in favor of expungement, this advisor will soon be able to shed the wordy customer dispute with the high settlement from his records and move forward with a perfectly clean BrokerCheck profile.

If you’re interested in removing a meritless or false disclosure from your public record, contact AdvisorLaw today for a complimentary case review.