.Investors are not the only victims of the Puerto Rico bond market crash. If you are among the hundreds of financial advisors caught up in a slew of customer complaints due to investors’ losses in accounts that were highly concentrated with Puerto Rico closed-end fund shares, relief is available to you. Once resolved, these investor disputes can be fully expunged from the CRD system by pursuing expungement through the FINRA Rule 2080 arbitration process.
In the majority of these customer-initiated complaints, the impacted advisor is not even a named respondent. Since any culpable conduct in connection with the sale of, and failure to properly supervise the performance of, Puerto Rican closed-end bonds, has already been imputed to the Broker-Dealers (for examples, see UBS PR Sanctions and Santander Sanctions), the financial advisor cannot be found to have been "substantially or materially involved" in these failures.
In typical settlements where a financial advisor is not required to contribute financially to the settlement paid to the claimant, FINRA has consistently held that the advisor was "not involved" in the alleged violation. Remarkably, this application of FINRA Rule 2080 is especially true where the customer complaint and subsequent settlement resulted from losses sustained as a result of a firm-wide failure to monitor accounts appropriately, such as is the case with these Puerto Rico closed-end bonds.
The impact of having negative disclosures on your BrokerCheck profile can no longer be ignored. Your professional integrity matters, and as such, you must take measures to Protect Your Livelihood. As these matters come to final resolution, your only recourse is to retain a highly qualified practitioner to successfully pursue FINRA expungement on your behalf.
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Samantha G. DePrima J.D., LLM
This blog is our ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.