October 11, 2013
It's not always the stockbroker's fault. Sometimes the product is toxic. Sometimes the brokerage firm is feeding its salesforce garbage. And, yes, sometimes the public customer is an idiot. In this interesting case, we have two victims: the customer and the stockbroker; however, in the end, it seems to turn out relatively well for both of them.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2012, public customer Claimant Hardesty, who represented himself pro se, asserted breach of fiduciary duty, misrepresentations/non-disclosures,errors/charges, and negligence in connection with some $23,153.00 in losses he had purportedly sustained in a Riversource Life Insurance Variable Universal Life Insurance Policy. In the Matter of the FINRA Arbitration Between Kevin E. Hardesty, Claimant, vs. Gary Dean Jurden and Riversource Distributors, Inc., Respondents (FINRA Arbitration 13-00001, October 4, 2013).
In the Statement of Answer, Respondent Gary Dean Jurden requested expungement of his Central Registration Depository records ("CRD").
SIDE BAR: A somewhat bizarre aspect of this Decision is that it makes no reference whatsoever to any Answer from Respondent Riversource or to any defenses asserted by either named Respondent. There is reference to "the Statement of Answer" but it is unclear whether it was duly filed by either or both respondents and what, if any, denials and/or defenses were asserted.
The sole FINRA Arbitrator hearing this matter denied all of Claimant Hardesty's claims against Respondent Jurden but found Respondent Riversource Distributors, Inc. liable and order the firm to pay to Claimant $23,153.00.
In granting Respondent Jurden's request for expungement of this arbitration from his CRD, the FINRA Arbitrator noted, in part, that:
Claimant's credible and uncontested testimony established that his losses stemmed from misinformation provided by Riversource Distributor's back office personnel who were authorized to give him advice about his policy. Claimant's losses were a result of his own confusion about the way the policy operated, and that confusion was directly attributable to the poor advice he received and reasonably relied on. The registered representative, Gary Dean Jurden was not involved in giving this this advice. Accordingly, the facts establish that the registered person's expungement request should be granted.
Bill Singer's Comment
An online FINRA record as of October 10, 2013, notes that this arbitration involved allegations that
CLAIMANT ALLEGES HE WAS NOT INFORMED THAT THERE WOULD BE A TAX CONSEQUENCE WHEN HE REQUESTED A PARTIAL SURRENDER OF HIS VUL POLICY. AS A RESULT, HE ALLEGES HE RECEIVED A 1099 IN FEBRUARY 2012 FOR $23,000 AND REQUESTS $23,153 IN COMPENSATORY DAMAGES.
A few bones -- small ones, at that -- to pick with FINRA and the quality control attendant to the issuance of its arbitration decisions. Here are a few suggestions. First off, please ensure that each decision specifies whether Answers have been duly submitted by all parties. Second, please ensure that all denials, affirmative defenses, cross claims, and counterclaims are noted. Finally, it's always helpful when sufficient content and context is provided in a decision so as to permit a reader to make some sense out of what specifically was alleged, how the purported damages arose, and what (if any) defenses/denials are presented in response.
Notwithstanding my disagreement with some aspects of this decision, compliments to the FINRA Arbitrator for recommending the expungement of this matter and for taking the time to explain the rationale for that finding. Not every loss is properly attributable to the servicing registered representative. At times, as the Arbitrator explains, a public customer may be confused -- sometimes that confusion is the customer's fault but other times it may be attributable to a third party outside the stockbroker-customer relationship. In this arbitration, the public customer was purportedly confused not by any advice given to him by Respondent Jurden but, to the contrary, "by the poor advice he received and reasonably relied on" from Respondent Riversource's back-office personnel.
In the end, the victimized public customer is rightly made whole. To some extent, Respondent Jurden was also victimized -- here by the "misinformation" given to his customer by his firm's back-office. The recommended expungement not only vindicates Jurden but will hopefully make his reputation whole once the full facts are understood.