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Award Date: November 8, 2024
Claimant Representative: Dochtor Kennedy, MBA, J.D. and Harris Freedman, J.D.
Respondent Firm: Edward Jones
Case Objective
In 2021, this former broker and current investment adviser with six years of industry experience faced an unexpected termination accompanied by a termination disclosure. The disclosure alleged that she had settled two customer claims away from the firm, marking the first blemish on an otherwise flawless professional record. Determined to restore her pristine public profile, she enlisted AdvisorLaw to guide her through the FINRA Dispute Resolution expungement process.
Summary
In 2019, a customer of the adviser, acting as Trustee for two trust accounts, faced a tax penalty of 50%, due to an incorrectly processed required minimum distribution (RMD) by her financial firm. The error affected both trust accounts, and the penalty was reported to the firm’s compliance department.
In 2020, the RMD issue was corrected, but the penalty remained unresolved. At the direction of the customer’s CPA, the adviser, wanting to act in her client’s best interest, agreed to reimburse the tax penalty by issuing two checks payable to the U.S. Treasury. The checks were submitted with a letter from the CPA to the IRS requesting penalty forgiveness.
However, due to the CARES Act of 2020, RMDs were not required that year, and the customer had to report the RMD on her taxes, using a 1099 form. The adviser informed compliance of the tax form requirement and believed her actions had resolved the issue without any harm or client complaint. However, the firm launched an internal investigation into the adviser’s handling of the situation, specifically regarding the reimbursement checks.
Resolution
After AdvisorLaw filed the adviser’s Statement of Claim for FINRA arbitration, the firm responded with a Statement of Answer, denying the adviser’s allegations.
At the FINRA hearing, the Arbitrator listened to the adviser’s testimony. Additionally, she heard compelling Dochtor Kennedy, MBA, J.D. and Harris Freedman, J.D. present arguments in favor of expungement, on the adviser’s behalf.
After considering the testimony and evidence, the Arbitrator recommended that “the Reason for Termination [on the adviser’s Form U5] shall be changed to ‘Voluntary’ and the Termination Explanation should be deleted in its entirety and shall appear blank.” Further, the Arbitrator recommended “expungement of all references [to the occurrences] from the [adviser’s] registration records maintained by the CRD [and that all] ‘Yes’ answers should be changed to ‘No,’ as applicable.”
Following the Arbitrator’s recommendation for expungement, the adviser’s record will soon be restored to its unblemished status.