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Award Date: August 25, 2023
Claimant Representative: Harris Freedman, J.D., HLBS Law
Respondent Firm: Woodbury Financial Services, Inc.
Case Objective:
A Los Angeles-based advisor approaching 25 years in the financial services industry had a clean public BrokerCheck record, with the exception of two customer disputes that she had acquired around the 2008 financial crisis. Wishing to seek expungement, she hired HLBS Law to guide her FINRA Dispute Resolution.
Case Summary:
In 2006, a woman was referred to our advisor for the purpose of opening a 403(b) account for the investor’s school district. The advisor explained 403(b) accounts to the investor and reviewed the investor’s profile. Upon opening, the 403(b) account contained the Oppenheimer Quest Balanced mutual fund.
A year later, the account had increased by approximately eight percent. The investor expressed her satisfaction with the Oppenheimer fund, and she told our advisor that she wanted to transfer another fund from an annuity that she owned, into the 403(b) account. Our advisor explained that liquidating the annuity would result in approximately a $14,000 surrender charge, and she discussed another Oppenheimer mutual fund with the customer. The investor chose to liquidate her annuity and use the proceeds to purchase Oppenheimer funds.
In 2008 and 2009, due to the financial crisis at the time, the investor’s portfolio declined. She discussed her dissatisfaction with the state of the market with our advisor, and she explained that she was considering a full liquidation of her portfolio. Our advisor advised the investor to hold her investments, and the investor did not provide any instruction to liquidate at that time. Subsequently, the investor left our advisor a voicemail expressing her dissatisfaction with her portfolio’s performance, and our advisor informed the branch manager of the complaint. Our advisor then received a customer dispute disclosure alleging that the investor incurred losses due to the advisor’s advice. The firm settled with the investor for about $10,000.
In late 2007, another investor sought our advisor’s assistance with changing the representative of record for an annuity that the investor owned. Our advisor helped the investor, and she became the representative of record for the investor’s annuity.
In late 2008, the investor moved to New Hampshire. Our advisor explained that she was not licensed in New Hampshire and that she could not be the investor’s advisor any longer for that reason. The investor was assigned to a new financial advisor who was licensed in New Hampshire.
As a result of the 2008 financial crisis, the value of the investor’s portfolio declined. The investor contacted our advisor at least twice, asking the advisor to execute trades in the annuity. Our advisor explained that she was unable to do so. Subsequently, our advisor transferred to another firm.
In early 2009, a customer dispute by the investor was reported to our advisor’s records, alleging unsuitability and failure to follow instructions and that she had experienced losses as a result. The firm denied the claim, but our advisor ended up with a second disclosure on her records.
Result:
The respondent firm participated in the expungement hearing, though the customers did not. The Arbitrator listened to our advisor’s testimony and Harris Freedman, J.D.’s arguments. The Arbitrator determined that the first customer “was informed by [our advisor] of the risks of the investments in her portfolio prior to purchase” and that the customer had “signed [the firm’s] suitability form, affirming that these Funds were suitable investments for her objective.” He noted that our advisor had “maintained regular contact with [the investor], at least monthly, to keep her apprised of the status of her investments” and concluded that the advisor had “made suitable recommendations and performed her duties as a representative in a thorough, ethical, and professional manner.”
The Arbitrator noted that our advisor had informed the second customer that she “was not licensed to trade securities in New Hampshire, and therefore [our advisor] could no longer be [the customer’s] financial advisor after her move to New Hampshire.” He concluded that, once again, our advisor had “performed her duties as a representative in a thorough, ethical, and professional manner” and that, therefore, the customer’s “allegations are clearly erroneous and false.”
The Arbitrator recommended expungement of both customer disputes — meaning that our advisor will soon have perfectly-clean public BrokerCheck and CRD records for the first time in about 15 years.