419 Retirement Plan Taxes Claimants in Wells Fargo Arbitration

July 3, 2013

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in April 2012, Claimants Saunders asserted fraudulent inducement, negligent misrepresentations, and breach of fiduciary duty in connection with alleged recommendations by the respondents concerning the creation of an employer-sponsored welfare benefit plan under §419 of the Internal Revenue Code. Claimants alleged that the recommended retirement vehicle was unsuitable and that they had not been advised by respondents of potential tax liabilities.  By the close of the hearing, Claimants sought $290,476.22 in compensatory damages plus punitive damages, interest, attorneys' fees, and costs. In the Matter of the FINRA Arbitration Between Michael Saunders and Yvonne Saunders, Claimants, vs. Wells Fargo Investments, LLC, John Wingate, Adam Suhr, Ross Friend, Strategic Financial Concepts, LLC, and Russell McNorton, Jr., Respondents (FINRA Arbitration 12-01470, June 21, 2013 ).

Respondents Wells Fargo Investments ("WFI"), Wingate, Suhr, Friend, and Strategic Financial Concepts ("SFI") generally denied the allegations and asserted various affirmative defenses. Additionally, the FINRA Arbitration Panel was asked to expunge the arbitration from the Central Registration Depository records ("CRD") of respondents Wingate, Suhr and Friend.

Arbitration Housekeeping

The FINRA Arbitration Panel determined that Respondent Russell McNorton, Jr. had not been properly served with the Statement of Claim or received due notice of the hearing.

After Claimants had presented their case-in-chief, around June 13, 2013, the Panel granted Respondent SFI's Motion To Dismiss.


The FINRA Arbitration Panel found Respondents WFI and Friend jointly and severally liable and ordered them to pay to Claimants  $75,000.00 in compensatory damages and $300 as reimbursement for FINRA's filing fee.

The Panel dismissed Respondent McNorton without prejudice.

The Panel dismissed Respondent Wingate with prejudice.


The Panel denied the requested expungements of the CRDs or respondents Wingate and Friend.

The Panel recommended the expungement of the matter from the CRD of Respondent Suhr after finding that he had not been involved in the sale of the 419 plan product to Claimants. As explained in the Decision:

[L]ater, when Wells Fargo asked Mr. Suhr to try to help Claimants, Mr. Suhr provided the claimants with a possible solution to Claimants' concerns. However, Claimants decided not to act on the possible solution that was raised by Mr. Suhr. . .

SIDE BAR With Bill Singer (Thomson Reuters)
Is Self Regulation A Dinosaur on Wall Street? (8:51 run time) 

Martin Kaplan, Esq. explains the significance of his landmark victory in Fiero v. FINRA. Kaplan and Bill Singer, Esq. discuss whether FINRA is now a toothless tiger. 

READ: "FINRA Loses Landmark Federal Appeals Case on Collection of Fines" (BrokeAndBroker.com, October 7, 2011)

Martin Kaplan, Esq. Talks About FINRA


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