The Arbitrator reviewed Claimant's BrokerCheck Report, which, along with Claimant's sworn testimony, confirmed that the Underlying Complaint did not settle. Therefore, there were no settlement documents for the Arbitrator to review. The Arbitrator noted on Claimant's BrokerCheck Report there was a discrepancy between the $90,000.00 the Customer requested as damages in her Complaint Letter, and the amount reflected on Claimant's BrokerCheck Report which stated that the alleged damages amount was $0.00. The firm had made a good faith determination that the alleged damages were greater than $5,000.00. Claimant could not explain the discrepancy and stated that he did not remember having noticed the discrepancy prior to the Arbitrator alerting him to it during the hearing.
The Customer's primary complaint was that in administering her accounts, all of which were discretionary accounts, Claimant made bad investment decisions during 2016. However, Claimant testified during the hearing that he had initially purchased pharmaceuticals that year which subsequently decreased in value, and that he shifted 100% of all three of her accounts (individual account, Roth IRA and standard IRA accounts) into bond mutual funds ahead of the United Kingdom's June 23, 2016 Brexit vote. Claimant explained that he did this because he anticipated turbulence and greater risk in the equities markets for the balance of 2016 in light of uncertainties regarding the potential outcomes and economic effects of the Brexit vote and our November 2016 United States presidential, senatorial and congressional elections. Claimant acknowledged that the Customer had a longstanding aversion to bonds because of their small returns compared to stocks and stock mutual funds, but that he had advised her beforehand of his reasoning and at the time she approved.The Arbitrator finds that the Customer's allegations of wrongdoing are clearly erroneous in fact and law because, among other things:A. Her New Account Form/Application (Statement of Claim exhibit 1) which she had signed on July, 6,2012, reflected that: (a) she had 25 years of experience with bonds, stocks and mutual funds; (b) her objectives were growth and income; (c) her time horizon was over 10 years; (d) she had a moderate risk tolerance; (e) her plans to use the accounts were to generate income for current or future expenses, to partially fund her retirement and to steadily accumulate wealth over the long-term; and (e) her marketable securities were in the high six figures, her annual employment income was six figures, she was single and almost age 56 years old when she moved her accounts to Respondent.B. Her Complaint Letter (Statement of Claim exhibit 3) does not indicate that she ever had any prior issues with Claimant's handling of her discretionary accounts between the time she opened them in July 2012 until she wrote him the Complaint Letter in 2017. (Although the exhibits proffered by Claimant did not include a signed copy of the discretionary account agreement(s), Respondent's Response Letter, in denying her claim, observed that her accounts were all discretionary, fee-based accounts (Statement of Claim exhibit 2). The Customer's Email admitted into evidence did not contend otherwise, nor did it address her June 24, 2016 email discussed immediately below.C. Besides explaining why Claimant's decisions in handling her discretionary accounts were prudent and permissible, and denying any liability, Respondent's Response Letter also pointed out that the Customer had actually thanked Claimant in a June 24, 2016 email for moving her to bonds before the Brexit vote, stating, inter arta: "saw the quick effect globally, including the drop in the Dow, S&P, etc. Thanks for the 'defensive position' taken to try to minimize the loss effect."D. As Respondent also set forth in its Response Letter, at the time she transferred her accounts from Respondent to another broker-dealer, the bond losses to that point were unrealized losses; for all that appears, had she not liquidated them when she did, it is at least conceivable those losses might have been recouped subsequently.E. Most fundamentally, broker-dealers and their registered representatives are not insurers of customers' investments. They are expected to exercise their judgment and skills in making recommendations and in the course of exercising their discretion; but to expect them to be infallible is too high a bar.
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