The Dead Customer, Her Son, Trading Losses, and Stockbroker's Expungement
March 3, 2017
Notice of the expungement hearing was attempted upon the complaining customer but that individual apparently died in 2012. In considering the requested expungement, the Arbitrator relied upon the pleadings, the testimony of the Claimant, Claimant Canell's BrokerCheck Report , and the Settlement Agreement between the Respondent and the customer. At the hearing, the Claimant withdrew his request for compensatory damages. Award The sole FINRA Arbitrator recommended expungement and offered the following rationale:
Evidence was presented at the hearing that led the Arbitrator to believe that Claimant did not perform the wrongdoing that was alleged in the customer's Statement of Claim, and thus expungement is granted pursuant to Rule 2080. First, as to the suitability claims: the record is clear that the customer provided her son with discretionary authorization of her account, that the Claimant continuously communicated his opinion that the son's trades were against his advice, that the Claimant discussed and reviewed the customer's account statement with the customer on at least a quarterly basis, and finally that the customer was aware of Claimant's dissent with her son's investment strategy. The transactions characterized as unsuitable were made by the customer's son, per her authorization, and made against the Claimant's advice. The Arbitrator reviewed the Settlement Agreement, considered the amounts paid to the customer and the conditions of settlement in reaching this decision.
THE MATTER SETTLED IN CONSIDERATION OF LOSSES CLAIMANT SUSTAINED AWAY FROM CGMI/MSSB AFTER CLAIMANT DIRECTED IN WRITING THE TRANSFER OF FUNDS TO CLAIMANT'S ACCOUNTANT. TO THE EXTENT THAT THERE WERE ADDITIONAL LOSSES, THEY RESULTED FROM UNSOLICITED TRANSACTIONS MADE BY CLAIMANT IN CONJUNCTION WITH HER ADULT SON AND NOT BASED UPON THE FINANCIAL ADVISOR'S RECOMMENDATION.
Read the BrokerAndBroker.com Blog "Expungement" ArchiveFINRA Rule 2080: Obtaining an Order of Expungement of Customer Dispute Information from the Central Registration Depository (CRD) System(a) Members or associated persons seeking to expunge information from the CRD system arising from disputes with customers must obtain an order from a court of competent jurisdiction directing such expungement or confirming an arbitration award containing expungement relief.(b) Members or associated persons petitioning a court for expungement relief or seeking judicial confirmation of an arbitration award containing expungement relief must name FINRA as an additional party and serve FINRA with all appropriate documents unless this requirement is waived pursuant to subparagraph (1) or (2) below.(1) Upon request, FINRA may waive the obligation to name FINRA as a party if FINRA determines that the expungement relief is based on affirmative judicial or arbitral findings that:(A) the claim, allegation or information is factually impossible or clearly erroneous;(B) the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or(C) the claim, allegation or information is false.(2) If the expungement relief is based on judicial or arbitral findings other than those described above, FINRA, in its sole discretion and under extraordinary circumstances, also may waive the obligation to name FINRA as a party if it determines that:(A) the expungement relief and accompanying findings on which it is based are meritorious; and(B) the expungement would have no material adverse effect on investor protection, the integrity of the CRD system or regulatory requirements.(c) For purposes of this Rule, the terms "sales practice violation," "investment-related," and "involved" shall have the meanings set forth in the Uniform Application for Securities Industry Registration or Transfer ("Form U4") in effect at the time of issuance of the subject expungement order.FINRA Code of Arbitration Procedure for Customer Disputes Rule 12805:Expungement of Customer Dispute Information under Rule 2080In order to grant expungement of customer dispute information under Rule 2080, the panel must:(a) Hold a recorded hearing session (by telephone or in person) regarding the appropriateness of expungement. This paragraph will apply to cases administered under Rule 12800 even if a customer did not request a hearing on the merits.(b) In cases involving settlements, review settlement documents and consider the amount of payments made to any party and any other terms and conditions of a settlement.(c) Indicate in the arbitration award which of the Rule 2080 grounds for expungement serve(s) as the basis for its expungement order and provide a brief written explanation of the reason(s) for its finding that one or more Rule 2080 grounds for expungement applies to the facts of the case.