The Arbitrators conducted a recorded telephonic expungement hearing on May 13, 2019 so the parties could present oral argument and evidence on Stephen Todd Walker's request for expungement.During the expungement hearing, which lasted more than 5 hours, Claimants' counsel, Lynne Lechter, Esq. and Ernest Sasso, Esq., appeared at the hearing, made an opening statement, cross-examined and re-crossed witness Respondent Walker, introduced evidence through witness Claimant Robin Adelman and made closing arguments. Claimant also filed an opposition to Respondent Walker's motion for expungement comprising of 13 pages and 7 attached exhibits.
As referenced above, the FINRA Arbitration Panel conducted a five-hour "expungement hearing," which doesn't quite make sense because there's no indication that prior to that point that the Claimants had settled with and/or dismissed their claims against Respondent Walker. Nonetheless, the FINRA Arbitration Panel states in part that the Panel decided that:
1. Claimants' claims are denied in their entirety.2. The Majority of the Panel recommends the expungement of all references to the above-captioned arbitration from registration records maintained by the Central Registration Depository ("CRD"), for Respondent Stephen Todd Walker . . .
Eight (8) hearing sessions @ $1,125.00/sessions = $9,000.00Hearing Dates:March 12, 2019 2 sessionsMarch 13, 2019 2 sessionsMarch 14, 2019 2 sessionsMarch 15, 2019 2 sessionsTwo (2) hearing session on expungement request @ $1,125.00/session = $2,250.00Hearing Date:May 13, 2019 2 sessions
The allegations of fraud, negligent misrepresentation, state securities law violations, and breach of fiduciary duty recited in the CRD do not promote meaningful investor protection. The Arbitrators unanimously determined that the Claimants did not prove any of the claims asserted in the Statement of Claim. . . .
The gravamen of Claimants' claims is that Respondent Walker induced Claimants to purchase 2,500 shares of Duff and Phelps Select Energy MLP Fund (Fund) at $20.00 per share for a total cost of $50,000.During the time Claimants owned the 2,500 shares in the fund, while Respondent Walker was their financial advisor at Oppenheimer, the value of their investment in the Fund decreased approximately $14,000.00. However, the Fund generated for Claimants $3,150.00 per year in dividends during the entire time Claimants owned their 2,500 shares in the fund. The Panel finds that the production of income fit Claimants' investment objectives.The testimony at the hearing on the underlying case reveals that Claimants were not employed at the time of making the investment; the Claimants depended on income from investments for their living expenses and tax payments. Shortly after Claimants transferred their accounts to Oppenheimer and Respondent Walker became their financial advisor, it was agreed that Claimants were spending more money than they earned and that they would have to limit their spending as well as change the asset allocation in their accounts to produce more income. Respondent Walker constructed a diversified portfolio that provided income to meet expenses.One of the investments that was purchased for Claimants' account was the Duff and Phelps Fund. Duff and Phelps was founded in 1932 and has offices around the world. Morningstar rated the Fund with 4 stars overall and 4 stars for a 3 year outlook. The fund paid $3,150.00 per year (6%) in dividends. The Fund fell into the Energy Risk Profile of the Wells Fargo Securities Equity Research Primer midway between less risk and more risk. The Panel finds that the Fund was a suitable investment for the Claimants in view of the overall portfolio and their investment objectives.Claimants in their Statement of Claim, allege "Claimant Robin Adelman repeatedly directed Respondent Walker to sell their fund, but he refused. Claimants complained to Respondent Grobman, to no avail." Claimant Robin Adelman repeated these allegations during her testimony at the hearing.During the evidentiary hearing more than 25 emails from Claimant Robin Adelman to Respondent Walker were accepted into evidence. In many of the emails Claimant Robin Adelman expressed concerns with her investments in the Fund. However Claimants have failed to produce a single email or any other credible evidence supporting a contention that Claimants directed Respondent Walker to sell their shares in the Fund. In one email, Respondent Walker specifically asked Claimant if she wanted to sell her shares in the Fund, Claimant did not reply.Respondent Grobman testified during the evidentiary hearings that Claimants never complained to him regarding their purchase of the Fund nor complained to him about the failure by Respondent Walker to carry out their instructions to sell the Duff Phelps Fund.Respondent Walker left Oppenheimer to work at RCB in March, 2016. Claimants' accounts were assigned to Mr. Silverman, whose manager was Respondent Grobman. Both Messrs. Silverman and Grobman met with the Claimants shortly after Respondent Walker left Oppenheimer. During the meetings Claimants' accounts were reviewed and several positions in the accounts were sold. Claimants 2,500 shares in the Fund were not sold at that time.Respondent Grobman testified at the evidentiary hearings that when he met with Claimants after Respondent Walker left Oppenheimer Claimants raised no concerns regarding their Fund investment and did not tell him to sell their 2,500 shares in the Fund. Claimants did not sell the 2,500 shares in the Fund until August, 2016 approximately 5 months after Respondent Walker left Oppenheimer.During the evidentiary hearings, evidence was introduced showing that Claimant Robin Adelman was an investor with at least 10 years of experience, that she read, and understood her account statements, and that she understood risk. Robin Adelman sent Respondent Walker numerous emails reflecting her continuous monitoring of investments. She acknowledged cycles in investments. She posed questions based on research she performed. There is no evidence to support allegations of fraud or negligent misrepresentation. Claimant Robin Adelman acknowledged receipt of the Duff & Phelps Select Energy Fund Investor Brochure and preliminary prospectus. She complained about ability to print out such a long document; there is no complaint about inability to read the information in a digital format. Claimant Robin Adelman asked to go over the prospectus with Respondent Walker but explained how difficult it is to squeeze in time to talk. She posed specific questions in her July 10, 2014 email. For reasons stated previously, Respondent Walker recommended the Fund in good faith, not for some nefarious undisclosed reason.The Claim of breach of fiduciary duty is clearly erroneous as well as false. The Panel determined that Walker was subject to the suitability standard, not the fiduciary duty standard. Walker was not a trustee of any investment account. Walker was not a fiduciary of any ERISA fund in which the Adelmans were participants or beneficiaries. The parties presented evidence on suitability of the Duff-Phelps investment. Walker cannot be subject to both a suitability and fiduciary duty standard.The claim of "emotional distress" is clearly erroneous as a matter of law. Evidence was not presented to support a claim of intentional or negligent emotional distress under Pennsylvania law. Claimants presented no argument or evidence to show that "emotional distress" is a violation of securities laws.The Majority of the Panel recommends the expungement based on affirmative findings that the claims are false and meritless. Furthermore, the claims of breach of fiduciary duty and "emotional distress" are clearly erroneous as well as false. . . .
The Panel has unanimously decided to deny Claimants' Claims in their entirety. Claimant Robin Adelman had extensive investing experience and the ability to determine whether a recommended investment was unsuitable. Robin Adelman was also knowledgeable in directing how her investment portfolio should be handled with respect to sales and purchases.The Majority of the Panel has decided to grant Respondent Stephen Todd Walker's request for expungement. I, Mary S. Wyatte, dissent from this decision for two reasons. First, expungement should be denied in order to preserve the transparency and integrity of the CRD system. Mr. Walker currently has two disclosures on his CRD which involve complaints similar to Claimants' complaint. Claimants' complaint should likewise be disclosed. It is important for other investors to be aware that Respondent has left behind dissatisfied clients, even if claims have been settled or denied. Second, expungement in this case does not meet the requirements of FINRA Regulation 2080. Although the legal basis for Claimants complaint was clearly without merit, the facts upon which the complaint is based, for the most part, were not false or erroneous.