Quadruple Expungement Victory For Industry Veteran In Colorado

With a financial services career spanning more than four decades, this Colorado-based, firm chairman, broker, and investment adviser had impeccable CRD and public BrokerCheck® records — until he was erroneously named in four customer dispute claims around 2020. 

At the time, Mutual Securities acted as a discount broker-dealer to facilitate transactions for an unaffiliated, fee-based registered investment adviser (RIA) firm. The RIA’s two owners were dually registered as representatives of both Mutual Securities and the RIA, but the broker and his colleagues were not registered with the RIA. Clients who were involved in the disputes filed against the Mutual Securities broker had discretionary investment-advisory agreements with the RIA, where the RIA charged a fee based on the clients’ assets under management in their advisory accounts. Notably, Mutual Securities did not receive any portion of the advisory fees, and the clients’ accounts were set up as discount brokerage accounts with no assigned representative from Mutual Securities.

All orders placed in the advisory accounts were discretionary trades initiated by the RIA’s owners, on an unsolicited basis. The broker, who served as President of Mutual Securities from January 2005 to December 2015, had no direct interaction with the clients, nor did he have any supervisory responsibility over the clients' accounts or the transactions executed. The last time when he was even assigned to any of Mutual Securities’ client accounts had been in 1999 — about a decade before the events in question.

Four clients filed claims against Mutual Securities, arguing that it held a fiduciary duty to oversee the unsolicited transactions that it processed for the RIA, due to the dual registration of the RIA’s owners. The clients’ attorney theorized that Mutual Securities’ officers and directors should be personally responsible, given their listed roles in the company. However, after a thorough investigation by FINRA’s regulatory division, no violations of securities laws or FINRA rules were found against Mutual Securities or the named individuals. As a result, Mutual Securities and the brokers were cleared of any wrongdoing in relation to the disputes.

Upon receiving notice of the broker’s Statement of Claim filing for expungement of the four claims through FINRA Dispute Resolution, Mutual Securities filed a notice of non-participation for the expungement hearing. Similarly, the customers declined to participate in the broker’s expungement hearing, as well. 

During the recorded hearing held by videoconference, the FINRA Arbitrator reviewed the documents submitted by the broker, including the settlement documents for the various customer dispute claims. The Arbitrator listened to the broker’s testimony and Harris Freedman, J.D. of HLBS Law’s arguments in favor of expungement.

Ultimately, the Arbitrator determined that all four of the disputes met the FINRA Rule 2080 standards for expungement, in that the claims, allegations, or information was factually impossible, clearly erroneous, or false. In his award, the Arbitrator specifically mentioned that “The underlying claims were all initiated by the same attorney who made allegations against all of the executives at Mutual Securities.” He added that the broker “had NO CONTACT WITH ANY OF THE UNDERLYING CUSTOMERS.” (Emphasis original). The Arbitrator also specified that the broker had neither advised any of the customers nor received any fees or commissions from their investments and that the RIA was in fact the investment advisor for each of the customers. 

With the FINRA Arbitrator’s award recommending expungement of four claims that should never have shown on the advisor’s records in the first place, he will soon be able to continue his long career with perfect records to show for it.

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.