Customer Venting Is Not Unsuitable
In the Matter of the Arbitration Between Carolyn Song-Pegg, Claimant, v. Fifth Third Securities, Inc., Respondent (FINRA Arbitration Decision 18-02309 / January 21, 2019)
In a FINRA Arbitration Statement of Claim filed in June 2018, associated person Claimant Song-Pegg sought the expungement of a customer complaint from her Central Registration Depository record ("CRD"). Respondent Fifth Third Securities, Inc. did not oppose the requested expungement. The customer filed an Affidavit supporting Claimant's request but did not participate in the hearing. The Sole FINRA Arbitrator recommended expungment and made a FINRA Rule 2080 finding that the customer's claim, allegation, or information is factually impossible or clearly erroneous, and false. The Arbitrator offered this rationale:
The Claimant discussed the investing strategy with the customer, who had a high net worth. The customer was upset about a one-day drop in the investment and emailed the Clamant [sic] about his concern. He later said that he was only venting and never intended it to be a complaint. He was happy with the Claimant and continued with the investment.Furthermore, he never said that the investment was unsuitable. That was the language used by Respondent. Therefore, the allegation is clearly erroneous. Moreover, the claim is false became the investment was suitable for a high net worth customer. In addition, there was never any real complaint and no settlement was necessary and no monies were paid out.
In October 2017, Respondent signed his Firm customer's name on a Distribution Request associated with an IRA account established for the benefit of a living trust. The unauthorized signature caused the transfer of funds from the IRA account to another of the trust's accounts, instead of to the accounts requested by the customer. The resulting transfer also caused potential tax consequences for the accountholders. The Firm maintained the Distribution Request as part of its books and records.The customer discovered the unauthorized signature on the Distribution Request in or around December 2017 when reviewing her accounts, and complained to the Firm. The Firm was able to reverse the transfer and effect the requested distributions prior to the customer incurring any negative tax consequences.By signing his customer's name to the Distribution Request without the customer's knowledge or authorization, Respondent violated FINRA Rule 2010. By engaging in this conduct and submitting the Distribution Request to the Firm as an original, Respondent also caused the Firm to maintain inaccurate books and records in violation of Rule 17a-3 of the Exchange Act. In doing so, Respondent violated FINRA Rules 4511 and 2010.