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The Vanguard Customer Didn't Ask, Didn't Listen, But The Firm's Voicemail Sucks
May 20, 2021
In a recent FINRA expungement case, we come across a dispute in which a Vanguard Marketing Corporation customer insists that he sustained losses after he had asked for a portfolio reallocation that wasn't performed. Except three independent arbitrators found otherwise. They said the customer hadn't asked, and, even if he did, those alleged losses weren't even losses. That's as dramatic a rebuke as you could imagine. But what the hell is with the firm's telephone system?
Case In Point
In a FINRA Arbitration Statement of Claim filed in September 2020, associated person Claimant Williams sought the expungement of a customer complaint from his Central Registration Depository records ("CRD"). Respondent Vanguard did not take any position on the requested expungement. In the Matter of the Arbitration Between Matthew John Williams, Claimant, v. Vanguard Marketing Corporation, Respondent (FINRA Arbitration Award 20-02946)
https://www.finra.org/sites/default/files/aao_documents/20-02946.pdf
Did He Ask For Help?
In recommending expungement, the FINRA Arbitration Pane, made a FINRA Rule 2080 finding that the customer's claim, allegation, or information was factually impossible or clearly erroneous, and false. As alleged in part in the FINRA Award:
1) The Customer's allegation that he requested the investment ratio in his Vanguard accounts be lowered from two-thirds stocks and one-third bonds is false. The Customer never requested any changes to the investment allocation and he expressly and verbally acknowledged to Claimant that he was satisfied with the current allocation of 65% stocks and 35% bonds until the next scheduled rebalancing, which was not scheduled to occur until August 2020.2) The Customer's allegation that he lost $675,000 between January 15, 2020 and March 19, 2020 because his investment allocation was not lowered as he requested is erroneous and false. First, as stated above, he made no such request. Secondly, the alleged $675,000 loss included losses from investments in all of his Vanguard accounts, some of which Claimant could not make any changes to. Third, the alleged $675,000 losses covered periods that preceded January 15, 2020 to March 19, 2020, the periods during which Claimant was not the Customer's financial advisor. Lastly, much of the alleged losses were actually not losses but were reductions to the amount of unrealized gains for the investments. In fact, when the Customer instructed Vanguard to sell all of his investments on March 19, 2020, he still had an overall net gain from his investments at Vanguard.3) Any losses the Customer incurred were result [sic] of not following Claimant's advice against selling all of his investments on March 19, 2020. If the Customer had followed Claimant's advice and not sold those investments, he would have recouped all of his losses and would have realized significant profits a few months later when the market recovered and reached new highs.4) Additionally, the evidence presented by Claimant indicated that Respondent's system for receiving telephonic and voicemail messages from customers was poor in that the Customer was put on hold for long periods of time and the voicemail messages he claims to have left for his financial advisor, Claimant, were never received by Claimant.
Bill Singer's Comment
Online FINRA BrokerCheck records disclose that Williams was first registered in 1997.
As to the allegedly requested portfolio reallocation, the FINRA Arbitrators bluntly found that the "Customer never requested any changes to the investment allocation." Further, as to the consequences of the failed reallocation, the arbitrators found that "much of the alleged losses were actually not losses but were reductions to the amount of unrealized gains for the investments." Moreover, as Claimant Williams must have read with delight and relish:
Any losses the Customer incurred were result of not following Claimant's advice against selling all of his investments on March 19, 2020. If the Customer had followed Claimant's advice and not sold those investments, he would have recouped all of his losses and would have realized significant profits a few months later when the market recovered and reached new highs.
You rarely see such a clear-cut a rebuke from independent arbitrators (two of whom were "Public" arbitrators and one a "Non-Public" ).
What are we to make of the assertion that:
Claimant indicated that Respondent's system for receiving telephonic and voicemail messages from customers was poor in that the Customer was put on hold for long periods of time and the voicemail messages he claims to have left for his financial advisor, Claimant, were never received by Claimant.
Yeah, I know, another stockbroker complaining about his firm's lousy phone system. Sure, go ahead and roll your eyes. I understand -- but, before you get to carried away, you might want to read "Vanguard Compliance Manager Submits Altered And Fabricated Documents To FINRA" (BrokeAndBroker.com Blog / March 3, 2021) http://www.brokeandbroker.com/5726/finra-awc-outage/ In the March 2021 article, we discussed the $5,000 fine and three-month suspension imposed upon a Vanguard Marketing Corporation employee: In the Matter of Yegor Kashirsky, Respondent (FINRA AWC 2019063625701)
https://www.finra.org/sites/default/files/fda_documents/2019063625701
%20Yegor%20Kashirsky%20CRD%204791076%20AWC%20va.pdf As noted in part in the Blog:
In January 2019, FINRA conducted an examination of Vanguard. The firm assigned Kashirsky to lead the firm's response to the exam. In that capacity, Kashirsky was responsible for locating, reviewing, and submitting responses to FINRA's requests.In connection with the 2019 exam, FINRA requested a copy of a firm document regarding Vanguard's contingency plan for responding to system outages. Prior to submitting the document to FINRA, Kashirsky removed certain sections of the document, including a section related to an alternate system through which Vanguard personnel could enter customer orders during system outages. He then submitted the altered document to FINRA without informing FINRA that the document had been altered.During the same exam, FINRA also requested a copy of an internal firm communication related to a trading outage. After failing to locate the communication, Kashirsky fabricated a copy of the communication based upon information gathered from a different trading outage. He then submitted the fabricated document to FINRA without informing FINRA that he had submitted a fabricated version of the communication.
Hmmm, on second thought maybe Claimant Williams' complaints about Vanguard's phone system were not so far fetched.
As I have recently admonished with increasing frequency, Wall Street does not quite understand or appreciate the necessity to maintain operational capacity sufficient to provide a professional level of customer service during times of extraordinary demand or during the more normal daily events. As we have all heard and/or experienced during the Covid and Reddit-fueled markets, it is not unusual to reach out to our brokerage firm for help only to be responded to with a taped message that keeps repeating. It is not unusual to be directed to filled mailboxes. It is not rare to be subjected to endless waiting times when seeking human assistance only to be disconnected. It is becoming the norm to be asked to push numbers on our phone that never deliver us to anyone capable of resolving our problems. Perhaps those who advocate on behalf of public customers will begin to take note of failures to maintain operational capacity and will cite that issue in their lawsuits against the industry.