by Bill Singer
FINRA Arbitration Expungement for Wells Fargo Broker
December 2, 2011
In a Financial Industry Regulatory Authority ("FINRA") Arbitraton Statement of Claim filed in December 2010, Claimant Stirling asserted unsuitability and breach of contract in connection the alleged mismanagement of her accounts by Respondents Dowley and Wells Fargo Advisors. Claimant sought to recover $339,950.00 in damages plus interest, hearing fees, and attomeys' fees. In the Matter of the Arbitration FINRA Arbitration Between Cynthia L. Stirling, Cynthia L. Stirling Living Trust, Cynthia L. Stirling,Trustee U/A DTD 2/21/1997, Cynthia L. Stirling SEP IRA, Cynthia L. Stirling IRA Rollover, Claimants,vs. James Firth Dowley and Wells Fargo Advisors, LLC, Respondents (FINRA Arbitration 10-05677, November 28, 2011).
Respondents Wells Fargo and Dowley generally denied the allegations, asserted various affirmative defenses,and sought the expungement of the matter from Respondent Dowley's Central Registration Depository records ("CRD") and Form U4.
The Panel held a telephonic hearing for purposes of considering the request for expungement of Respondent Dowley's CRD and U4. The request was opposed and contested by Claimant.
Decision
The FINRA Arbitration Panel denied Claimant's claims and recommended the expungement of Respondent Dowley's CRD and Form U4. Pursuant to the procedural requirements of Notice to Members 04-16: Expungement, the Panel recommended the expungement of Respondent Dowley's CRD and U4 based on the conclusion that "Respondent Dowley, as the overseer of Claimant's non-discretionary accounts, and lacking precise and specific instructions from his client, did not violate any ethical or industrial rules and regulations."
Although the Panel's Decision was unanimous, Chairperson Ferdinand Schoch desired to submit the following explanation:
This case centers on a seven-month period in 2009 and 2010, at the beginning of which Claimant Stirling transferred a large sum of money to new, non-discretionary accounts with Respondent Dowley and his brokerage, all in cash or cash equivalents, with the intention of investing largely in equities, in order for her to profit from an expected upturn in the market. However, Claimant did not provide Respondent with any specific written instructions to that effect.
Respondent, as Claimant's long-term stockbroker, intent on keeping her investment safe and inexpensive, kept the direct costs of maintaining this investment to a minimum while generating a modest income from various conservative and safe investments, and did not make an effort to convert a large part of Claimant's investment to equities.
Consequently, after the transfer of the funds, the next seven months were marked by a serious lack of communication behween Claimant and Respondent, with neither side making a genuine effort to resolve the misunderstanding. After the seven months. Claimant pulled her investment out and transferred the proceeds to another broker.
Claimant is now suing Respondents, among other things, for damages caused by gains lost as a result of the consenvative investment. Considering the above, this Arbitrator concurs with the decision by his fellow Panel members to deny all claims.
Bill Singer's Comment
Kudos to Chair Schoch for taking the time and making the effort to transform a vague decision into one that explains the facts and provides a substantive rationale. Not only do we know have a better appreciation for the nature of the customer's complaints, but we also have the basis for understanding why the servicing stockbroker was entitled to some exoneration for his conduct.