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Award Date: June 29, 2023
Claimant Representative: Dochtor Kennedy, J.D., MBA
Respondent Firm: Securian Financial Services, Inc.
Case Objective:
An investment adviser in Tennessee had four customer dispute disclosures on his record that were all over ten years old. Hoping to clean up his record under the current FINRA arbitration rules, he hired AdvisorLaw to bring him through the FINRA Dispute Resolution forum.
Case Summary:
Two married individuals lodged the first two customer disputes on our advisor’s records. They had purchased two annuities over a five-year relationship with another advisor. While our advisor had not been involved with the recommendations, he was part of an advisory group with three other advisors, and all four members of the group received commissions on the annuity sales.
In 2009, our advisor was elected by the advisory group’s principals to be the group’s managing member, and he thereby became both CEO and CFO of the group. A month later, he noticed discrepancies in the group’s books, and he worked with the county district attorney regarding the previous group leader’s fraudulent activities. Meanwhile, the other principals of the group met with certain clients and encouraged them to file complaints against our advisor, in hopes of coercing him into a settlement.
The wife lodged a complaint in April 2009, and the husband lodged a separate complaint that June. They alleged unsuitability and misrepresentations, and both claims were denied. Yet they sat on our advisor’s records for nearly 15 more years.
The third claim was lodged by a couple who purchased life insurance and an annuity through our advisor in the early 2000s. The investments declined due to the 2008 financial crisis, and the principals of the advisory group encouraged the couple to lodge a claim of their own. Their claim was similarly denied, but our advisor ended up with another allegation of misrepresentation on his records.
The fourth claim was lodged by a couple with whom our advisor met on one, sole occasion to speak generally about the Certified Financial Planner™ process. The couple purchased life insurance and annuities through another advisor, and the investments declined around 2008. That couple was also encouraged by the group’s principals to file a claim, and they filed for FINRA arbitration in 2011, alleging negligence and unsuitability and seeking $725,000 in damages. The firm settled with the couple for $400,000, and our advisor was left with a fourth disclosure.
Result:
Neither the firm nor the customers participated in our advisor’s arbitration hearing. The Arbitrator reviewed the settlement agreement for the fourth dispute and our advisor’s written submissions and exhibits. He listened to the advisor’s testimony and to Dochtor Kennedy’s, J.D., MBA arguments in favor of expungement.
The Arbitrator noted that, in regard to all four accounts in question, our advisor “was an Assisting Advisor and not a Soliciting Advisor” and that, “As an Assisting Advisor, [he] provided no recommendations or investment advice to the Customers.” The Arbitrator determined that “the Customer’s investments were suitable…and appropriate disclosures were provided regarding the features of the investments and annuity.” Specifically, he mentioned that “It should be noted that in every complaint, [our advisor] was found as having not committed any violation or wrongdoing.” He concluded by stating his opinion that the allegations were false because our advisor had not been involved with the alleged investment-related sales-practice violation. The Arbitrator recommended expungement pursuant to FINRA Rules 2080(b)(1)(B) and 2080(b)(1)(C).
With all four disclosures soon to be wiped from our advisor’s records, he will soon have perfectly-clean CRD, BrokerCheck, IARD, and IAPD records, once again.