Utah Advisor Wipes Records Clean With Triple Customer Dispute Expungement

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Award Date: February 15, 2024
Claimant Representatives: Dochtor Kennedy, J.D., MBA, and Harris Freedman, J.D.
Respondent Firm: Securian Financial Services, Inc.

Case Objective & Summary:

A registered rep in Utah with a 29-year career in the industry had three marks on his otherwise stellar public record. Two were customer disputes from 2008, and the third was a denied dispute from 2016. Ready to return to a perfect public record, the advisor hired AdvisorLaw to bring him through FINRA arbitration, in hopes of achieving expungement.

Summary:

The first dispute arose from the purchase of a variable adjustable life (VAL) policy by a client of the advisor in 2003. The investor who purchased the VAL later divorced her husband and began a relationship with a financial advisor with another firm. Unaware that the investor already owned term insurance, her new boyfriend encouraged her to purchase term insurance from him. He also convinced her that she should not be paying the nearly $20,000 annual premiums required to meet the VAL’s death benefit guarantee. The advisor provided the investor with the necessary forms to decrease her premiums, though she never returned the forms, despite multiple reminders by the advisor. In 2008, the investor surrendered the VAL against the advisor’s recommendation. Her new husband mistakenly believed that a payment had been lost, and they filed a claim against the advisor alleging that he had failed to provide the forms to decrease the premiums. The firm found the claim to have no merit and denied it.

Around mid-2008, an existing customer of the advisor was concerned about the state of the market and wanted to liquidate his portfolio to cash and transfer that cash to his guaranteed principal account to protect it from market volatility. The advisor offered to execute the liquidation of the portfolio for the investor. However, the investor insisted that he wanted to learn how to execute the transaction himself from his home computer. The advisor traveled to the investor’s home and assisted him with the liquidation and transfer. They then attempted to cancel the automatic rebalancing of the customer’s portfolio and believed that they had successfully done so. Yet about one week later, unbeknownst to the advisor and investor, the investor’s portfolio was automatically rebalanced, which exposed the investor to market volatility. As a result, the portfolio’s value declined. Compliance then directed the advisor to encourage the investor to file a complaint against him so that his errors and omissions insurance would cover the cost. He did so, and he ended up with a second disclosure on his records. 

In mid-2011, the advisor executed a partial term conversion of a life insurance policy for an existing customer. The customer planned to pay annual premiums of $4,000 on the new policy, and she signed all documentation attesting to its suitability, etc. A couple of years later, she increased the policy’s coverage, and she increased her premiums to $6,000 per year. Subsequently, she married, moved, and began constructing a home. As the home went over budget, she began to request withdrawals from the policy to fund the build. The withdrawals caused losses to her policy, though her portfolio more than doubled since inception. Nevertheless, the investor lodged a claim, alleging that the advisor had misrepresented the policy and that it was unsuitable for her. The firm denied the claim, but the advisor now had three disclosures on his record.

Result:  

None of the customers participated in the FINRA Dispute Resolution hearing, though the customers who lodged the second dispute submitted affidavits in support of the advisor’s request for expungement. The Arbitrator reviewed the settlement documentation and all other documents and exhibits that were submitted. Dochtor Kennedy, J.D., MBA, and Harris Freedman, J.D. presented their arguments in favor of expungement, and the advisor also testified.

After considering all of the evidence, arguments, and testimony, the Arbitrator penned a brief explanation for his reasoning on each claim. He pointed out that the first customer “did not lose any money” and that she “was sent the paperwork to modify her policy provisions, but failed to fill it out and file it with the insurance company.” The Arbitrator brought up the second investors’ affidavits and mentioned that they “did not want to file the complaint, but [that the advisor] urged him to in order to be compensated.” He also mentioned that “This matter was a trade correction only” and that “The Statement on BrokerCheck Report is at least in part false and is misleading.” Regarding the final claim, the Arbitrator stated that the customer “actually wanted the policy that the claim states was unsuitable, and [the advisor] got her to agree to take a more conservative approach, which also allowed [her] to withdraw later without any surrender charge.” He stated that it was the customer “who subsequently moved, in steps, to the type of policy she complained about.” 

With the FINRA Arbitrator’s determination that all three disputes contain false information, he has recommended expungement, and this advisor’s record will soon be completely cleared of all disclosures.

If you’re facing a meritless or false customer dispute, contact AdvisorLaw today for a complimentary consultation.