Three-Arbitrator Panel Expunges Covid-Related Dispute For San Antonio Advisor

In his nearly 20 years in the financial services industry, this San Antonio broker and investment advisor received only one customer dispute. The customer lodged several allegations and sought nearly $100K, and the firm settled for a quarter of the amount sought. Seeking to expunge the mark to secure a public record reflective of his stellar history of conduct, he hired AdvisorLaw to bring him through FINRA’s Dispute Resolution forum for expungement.

A couple became clients of the advisor in February of 2020, after being referred by a co-worker. The wife, a 56-year-old federal employee nearing retirement, sought assistance understanding her retirement income and benefits, while the husband, a 55-year-old retired military veteran, wanted to pursue more aggressive investment strategies. 

After assessing their profiles, the advisor recommended two investment products—a Sammons mutual fund, and a Jackson fixed-index annuity. The wife desired safety and therefore chose the Jackson Annuity for $300,000, emphasizing principal protection. Dissatisfied with his Primerica ROTH IRA, the husband sought higher returns through the Sammons Fund, at $133,000. Both investments involved detailed disclosures, including fees, risks, surrender penalties, and benefits, which the couple acknowledged and signed. The investments aligned with their stated goals of capital preservation, wealth accumulation, and retirement income with no short-term liquidity needs.

However, after moving to Florida and overspending on their new home, amid market declines during the Covid pandemic, the couple became dissatisfied with their investments. The husband expressed frustration and sought more conservative options. Encouraged by an attorney, the couple filed a FINRA arbitration claim in November 2023, alleging that an investment that had allegedly been made in 2019 involved unsuitable recommendations and excessive fees and that the advisor had failed to disclose surrender penalties. The customers sought $99,000 in damages. The advisor denied all allegations, citing documented disclosures and asserting that the losses were due to the couple’s market-timing decisions during volatile conditions.

The firm settled with the couple for $25,000. The advisor did not contribute to the settlement, which was made solely to minimize expenses and time associated with continued proceedings.

The FINRA expungement hearing was overseen by a panel of three FINRA arbitrators. The Panel reviewed the documents and exhibits, and they listened to the arguments presented by Alex Padla, J.D. and Dochtor Kennedy, MBA, J.D., as well as the advisor’s testimony. 

After considering all of the testimony and evidence, the Panel found the claim to be false and clearly erroneous, because “the [advisor had] explained the fees and surrender charges in detail twice after conducting a thorough assessment of the Customers’ profile, risk tolerance, and investment objectives.” The Panel added that “the Customers signed multiple acknowledgements of all the disclosures which were made both in writing and verbally.”

The Panel went on to state that “the allegation that the Customers invested in 2019 is false because the contemporaneous documents prove that they did not invest with [the advisor] until 2020” and that, “when they withdrew their investment early, the investment had not yet had time to recover from the pandemic’s impact.” The Panel mentioned that “One of the customers remains a customer of [the advisor] today, which the Panel finds inconsistent with any belief that [he] misrepresented information to her and her husband.”

The Panel’s award closed with a statement indicating that, “At the time of the investment, no one knew the impact [that Covid] would have on the stock market, and no one knew that the Customers would need to take out their funds early to cover the excess expenditures on their retirement home.”

With all three FINRA arbitrators on the Panel unanimously in agreement that the disclosure should be expunged, this advisor will soon have records reflective of his excellent career history.

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.