10 Years After, World Is Changed For Ameriprise Stockbroker In FINRA Expungement

October 9, 2018

I'd love to change the world. The question is where to start. Take Wall Street, for example, where the overwhelming majority of customer complaints strike me as meritorious. On the other hand, after nearly four decades on the Street, I have concluded that the overwhelming majority of stockbrokers are honest, decent men and women. It is a continual battle reconciling my sense that most complaining customers are frequently right with the fact that many stockbrokers named in complaints are innocent of the alleged misconduct. In order to balance out those different aspects, it often turns out that in a given customer dispute, the employing brokerage firm is solely at fault rather than the individual associated person; or, a given product was toxic and the flaw hidden from the stockbroker; or, losses were sustained not from misconduct but from the vagaries of the markets involved. In trying to establish equilibrium, I also must accept the fact that some customers are full of crap and are merely trying to avoid losses and some stockbrokers are full of crap and are merely doing whatever it takes to make a sale. Pick any industry where there are customer relationships, however, and you'll likely find the same dynamic. It's not just Wall Street. When the two worlds of unhappy customers and indignant stockbrokers collide, justice may prove elusive. Biases and memories being what they are, we tend to err on the side of the customer who lost money -- I got no problem with that. Seems fair but to a point. In today's BrokeAndBroker.com Blog we come to just such a point. After a decade of apparent injustice, a stockbroker asks to have his industry record scrubbed clean. Ten years after, he asks to have his world changed  -- hmmm, wasn't there a rock band and song . . . and what was their name . . . and what was the song's title???

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in January 2018 and amended thereafter, associated person Claimant Sangirardi sought the expungement of a 2008 customer complaint, which had evolved into a 2009 FINRA arbitration, from his Central Registration Depository records ("CRD") and $1 in compensatory damages. Although Sangirardi was named as a Respondent in the customer's arbitration complaint, the award was rendered solely against Respondent Ameriprise Financial Services; and, thereafter, Sangirardi did not contribute to the award. In the Matter of the FINRA Arbitration Between Michael Lawrence Sangirardi, Claimant, vs. Ameriprise Financial Services, Inc., Respondent (FINRA Arbitration 18-00276, October 3, 2018).

Respondent Ameriprise requested that in the event Claimant Sangirardi was able to establish the necessary factual basis for the expungement request, the FINRA Arbitration Panel:
  • issue an award that recommends the expungement; 
  • deny all requested relief; and
  • assess all costs and fees against Claimant.
Claimant Sangirardi provided FINRA with proof that he had notified the customer of his expungement request and of her right to participate and testify at the expungement hearing. 

Expungement Hearing

Respondent Ameriprise participated in the expungement hearing but did not contest the expungement request. The customer did not participate in the expungement hearing and did not contest the request for expungement.

Claimant Sangirardi voluntarily withdrew his request for $1 in compensatory damages.

Expungement Recommendation

The sole FINRA Arbitrator recommended the expungement of the customer complaint pursuant to this rationale:

[C]laimant asserts that a FINRA Arbitration Panel found that Claimant had not violated any FINRA rules or acted improperly in FINRA Case Number 08-01978. The same FINRA Arbitration Panel ordered his employer, Ameriprise Financial, to pay damages in the amount of $67,500. In response to the Claimant's claim for expungement, Ameriprise Financial filed an Answer supporting the Claimant's request for expungement after a review of the facts of the customer case. Ameriprise Financial agrees that the CRD entry is misleading to the public and that there is no customer protection value in reporting the entry. Although the award in the customer matter was issued in 2009, the Claimant testified that the entry on his CRD record has continued to impede his business in that he must constantly explain the entry on applications for new licenses and business applications and on one occasion, an invitation to speak at an event was withdrawn as a result of the entry. The Claimant does not know how many other business opportunities were lost as a result of the CRD entry. 

The entry states that: 

Claimant claims that Advisor recommended she refinance her home to fund her retirement income. Claimant's claims include breach of contract, breach of fiduciary duty, unsuitability, fraudulent misrepresentation, failure to supervise, negligence and disgorgement of commissions. Claimant seeks an unspecified amount in damages as a result of Advisor's improper and unsuitable advice.

A review of the award in the underlying case shows that the Claimant, although
named as a respondent in the customer case, was not found to have engaged in any
of the alleged activities and that he was not directed to contribute to the award in any
manner. The award was solely made against Ameriprise.

A. The entry is factually impossible or clearly erroneous. First, the customer resided with her daughter in another city and not at the house that was refinanced. The house was therefore an investment property (even though, as per Claimant's counsel, there is no rule prohibiting the mortgaging or selling of a home to finance retirement income). Second, Claimant recommended that the customer refinance her investment property to pay off liens that had been filed against it for unpaid property taxes on subject house and to take advantage of lower mortgage rates. With the proceeds from the mortgage refinancing, the customer wanted investments to provide for healthcare, payment of taxes, estate planning and cash availability. There is no evidence that Claimant engaged in conduct that may be described as a breach of contract, breach of fiduciary duty, unsuitability, fraudulent misrepresentation, negligence, failure to supervise or any wrongdoing that required the disgorgement of commissions. In addition, the entry is further impossible or clearly erroneous because "disgorgement of commissions" is a remedy rather than a theory of wrongdoing. 

B. The customer claim, allegation or information is false. The record shows that the Claimant recommended a diverse portfolio of investments and products which would take care of the customer's healthcare needs, income needs and retirement income in addition to extinguishing the tax debt. The recommendations were consistent with the objectives of the customer. In addition to the Claimant, the customer also had access and used the services of an attorney for estate planning and a mortgage broker, and the Claimant coordinated with these professional advisors. According to the Claimant, the customer and her daughter, who was present during all conversations, were capable of understanding the investments and purposes and were engaged in the selection of the products. To the extent that the investment accounts lost value, the losses were attributable to the customer's failure to follow the plan, e.g., customer's excessive withdrawals, and not to the failure of the products or the recommendation of unsuitable products or other improper actions of Claimant. Accordingly, there could be no finding of breach of contract, breach of fiduciary duty, unsuitability, fraudulent misrepresentation, negligence or any conduct that would be considered a violation of sales practices rules. The finding confirms that the entry describing the customer claim and allegations against the Claimant are false. 

C. The Claimant's CRD does not contain any other negative information. The entries concerning the customer claim are the only customer dispute entries. 

Bill Singer's Comment

Generally, I do not name the FINRA arbitrator(s) or lawyers involved in a Decision. I do not omit the names out of a sense of protecting confidentiality because the names are disclosed in the published Decision. My preference for non-disclosure is largely prompted out of a desire to focus on the facts and rationale for the decision, and the names of those advocating and deliberating are merely additional, unimportant bits of information. When I come across a superior bit of adjudicating or lawyering, however, I sometimes make a point of giving credit where credit is due. In today's featured FINRA Arbitration Decision, I would like to commend Sole FINRA Public Arbitrator Lynne M. Reid-McQueen for a wonderfully drafted Decision replete with sufficient content and context. 

Among the notable aspects of the Decision is its presentation of the negative impact of the disclosed customer complaint. Arbitrator Reid-McQueen relates Claimant Sangirardi's explanation that the ongoing disclosure on his CRD meant that he "must constantly explain the entry on applications for new licenses and business applications and on one occasion, an invitation to speak at an event was withdrawn as a result of the entry. The Claimant does not know how many other business opportunities were lost as a result of the CRD entry." Similarly, I appreciate the Arbitrator's effort to clarify that the property for which the customer sought refinancing was not her home of primary residence but an investment property -- a nuance that matters when considering whether Sangirardi's recommendations were suitable. In the end, we are left to grapple with the unusual circumstances of a 2008 FINRA customer arbitration that was filed against Respondent Ameriprise and Respondent Sangirardi; in 2009, the customer prevailed only against the firm; and, in 2018, the stockbroker clears his industry record based upon an expungement Decision that justifies the latter action in a compelling and articulate manner. Ten years after, the world is changed.