15 years in business... Legal question

I'd love to post this in the legal section but I see that it's blocked off for new users. My situation is pretty easy to explain so I'll be brief.

Inherited a client in 2009. Not a nice person. Difficult to work with, didn't often take advice, etc. Has managed accounts which have done beautifully. Also has muni bonds. Three were Puerto Rico bonds (see where this is going?) We discussed the bonds, often, and regularly. This is noted in my records. I did not buy these bonds.

Relationship was always touchy. Client called in 3rd quarter 2013, asked about the bonds. We discussed, client didn't sell. Client was advised to sell now if they could not take further volatility. Client did not want to sell.

Several discussions later, client demands sale of bonds. $10k loss from Par. Also demands bonds trading at 93 cents on dollar be sold. Total loss under $15k.

Two weeks ago called my branch manager out of the blue, and said I betrayed them. Made demand for their money back. Said I gave unsuitable advice. Mind you, client has large stock portfolio, which I recommended they reduce due to age (client is 86 years old.. did I mention inherited?) Also owns large positions in small cap funds outside of firm. They are familiar with risk.

Coming up to the question: Reportable event? Saddled on my U4? These were brokerage accounts, mind you. I didn't buy these things and I told them repeatedly they were weakest bonds they owned, and that they'd bounce all over the place. I argue it's a service issue, not a reportable one, but of course it's out of my hands. Their claim that I didn't call them about the drop is complete horse hockey, but of course the current rules regime doesn't care about the validity of the claim, just the nature. Merely curious if my 15 year run of a clean u4 is about to end. I am a very cautious investor. The lesson here is never accept someone else's dregs, even if it's a 2mm relationship.

Thanks, and sorry again for posting it here instead of in Legal.

TO be clear, and this is why I'm coming to this forum, because I don't know if it's a worthwhile distinction (although my Compliance Officer seems to), I did NOT buy these bonds. They were sitting, in the account, for years before this person darkened my doorstep. And this client NEVER sells bonds.

I'm glad you responded, since you have Branch Manager experience. Does this distinction matter? To me, it's huge, and to my CRO it's a big deal, but of course we're in the bubble looking outwards, waiting for a ruling from legal.

Thanks for the first reply!

I think your distinction has merit. I know the standards are lower for brokerage accounts than Advisory accounts, although I never thought I'd be in a place where I'd have to make that sad distinction. Any further advice from the compliance expert you mentioned would be most welcome!

BTW, this is thus far a verbal complaint with a demand to get $16k back (although the loss was $13k so where that number comes from... I am suspicious that someone coached her.) She is swinging to a NY office for my firm, which makes me think some rookie (or just a real dirtbag) has convinced her that I am pure evil in order to convince her to go with him. Good luck, buddy. If you're mortgaging your soul for a $2mm account, you're going to have a tough, tough career.

Definitely reportable. I had a situation where a branch manager did something with a client of mine when I was out of the country. Client wrote a complaint which didn't mention me but it went on my u4.   

Yet another reason to do something else.

If I ever do leave this industry I imagine in some ways it'll feel very liberating.

Just curious, if this does go on your U4 could you sue this cunt for defamation of character?

So, related to this, it looks like FINRA is actually going to get approval to require all B/Ds to post a link to Brokercheck on each FAs website. (article in Investment News, i read the hard copy, don't have a link). 

no. they are talking about having the home page on Brokercheck on all FA's websites

Fixed.

I miss Ilya. And I'm not him

Edited by Sportsfreak - May/10/2014 at 4:27pm

I typed without looking while I was on the phone. I wasn't drunk


Edited by Sportsfreak - May/10/2014 at 5:23pm