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Award Date: August 24, 2024
Claimant Representatives: Dochtor Kennedy, J.D., MBA, and Harris Freedman, J.D.
Respondent Firm: LPL Financial LLC
Case Objective:
More than 22 years into his career in the financial services industry, this Wisconsin-based financial advisor was terminated by LPL — and his pristine record was scarred with an “employment separation after allegations” disclosure. In hopes of removing the mark and reinstating his glowing record, the advisor hired AdvisorLaw to bring him through FINRA’s expungement process.
Summary:
Our client joined LPL in late 2009. Five years later, he was supervising his branch when another financial officer joined. The other advisor managed the office along with our client and two others. The other advisor took the Series 65 exam more than twice, without passing. However, he did hold Series 6 and Series 63 licenses to sell securities.
In 2015, our client entered into an oral arrangement with the other advisor, whereby the other advisor could direct prospective clients to our client, and those who chose to become clients of LPL would be entered under our client’s number. In return for the referrals, our client paid ¾ of the advisory fees to the other advisor. It was our client’s understanding that he would hold the client accounts until the other advisor passed his Series 65 exam.
In mid-2018 and mid-2019, our client disclosed the terms of the arrangement on LPL’s annual questionnaire, and LPL raised no issue with the arrangement. In early 2019, the other advisor began discussing the purchase of a minority interest in a book of business from a group of representatives who had formerly been registered with LPL. In mid-2019, our client communicated his fee arrangement with the other advisor to LPL. About a month later, LPL directed our client to discontinue making payments to the other advisor, and our client complied.
In November 2019, LPL terminated our client’s employment. Our client was not informed of the reason for his termination. That December, LPL published a termination disclosure to our client’s records, alleging that he had entered into a fee-sharing arrangement with an individual who was not licensed as an investment adviser, without providing LPL with adequate notice.
Resolution:
Before our client’s expungement hearing, LPL submitted an answer to our client’s statement of claim. Therein, LPL denied our client’s allegations and asserted various affirmative defenses. LPL requested that the FINRA Arbitrator deny our client’s request for expungement and assess all expenses to him, as well.
During the FINRA arbitration hearing, the Arbitrator listened to our client’s testimony and the arguments on his behalf that were presented by Dochtor Kennedy, J.D., MBA, and Harris Freedman, J.D.
After considering both sides, the Arbitrator made a recommendation in favor of our client. He recommended that the “Reason for Termination and Termination Explanation” portions of Form U5 be expunged, that the “Reason for Termination” be changed from “Discharged” to “Voluntary[,]” and that the “Termination Explanation” be deleted in its entirety and appear blank.
Beyond that, the Arbitrator recommended the expungement of all references to the occurrence from the Central Registration Depository (CRD).
Despite LPL’s resistance and opposition, AdvisorLaw was able to secure the expungement sought by our client. This advisor will soon have a perfect record once again, and he can enter his 25th year in the industry with a clean slate.