Fired Texas Advisor Overcomes Firm Claim for Reimbursement
(Updates with response from Cambridge in eighth paragraph.)
In an unusual decision, a Finra arbitration panel in Dallas, Texas, this week turned down independent broker-dealer Cambridge Investment Research’s request for about $400,000 in client reimbursements and litigation costs from a broker it had terminated, and instead awarded him more than $50,000.
Cambridge had dismissed Kermit G. Gable, Jr. in late 2016 for “improper trading” activities in some client advisory accounts, according to his BrokerCheck report. Almost a year later, it filed an arbitration claim for return of almost $327,000 it had paid to Gable’s clients after reviewing “block-trading activities,” according to the award decision dated this Monday.
Citing indemnification terms in Gable’s registered rep agreement signed in 2012, Cambridge also sought a sanction of $10,000 from the broker plus attorneys’ fees and costs of more than $55,000.
The three-person arbitration panel denied Cambridge’s claims in their entirety on Monday and ordered the Iowa-based firm to pay the broker $43,750 in “equitable relief” and $6,957 of attorneys’ fees.
Gable, who since 2017 has run a financial planning and registered investment advisory firm in Arlington, Texas, called Fidelis FS, LLC, had asked in his arbitration counterclaim for more than $102,000, including $70,000 of “personal fees” that he calculated at a rate of $200 per hour, and $25,000 in punitive damages, according to the award.
As is typical in written arbitration decisions, the Finra panel of two public and one non-public arbitrators did not explain their decision.
Gable, whose advisory firm manages $2.7 million, according to its April 2018 regulatory brochure filing, declined to comment, saying he has not yet received the award.
Cambridge declined to comment on the award or its consequences. “We respect the arbitration process, but per our policy we do not comment on details,” spokeswoman Cindy Schaus wrote in an e-mail.
The Texas State Securities Board in April 2017 suspended Gable from acting as an investment advisor representative in the state for 150 days for failing to prepare a written statement responding to its investigation of Cambridge’s Form U5 filing about his dismissal. The regulator was reviewing Gable’s alleged execution of “a significant number of trades in the block trading account as part of an active trading strategy” in advisory accounts, according to his BrokerCheck report.
Gable, who is a captain in the U.S. Army Reserves, said in a brief interview that he had been deployed overseas when the state investigation was occurring.
On his BrokerCheck report, Gable commented that he was “permitted to resign” from Cambridge following a disagreement “concerning trade allocations between two family related accounts.” The disagreement occurred with an unnamed registered investment adviser.
Cambridge allows its affiliated advisors to use its corporate RIA or their own, according to its website. Gable was affiliated both with the broker-dealer and its Cambridge Research Advisors, Inc. RIA, according to the Finra database.
Gable, who was born in 1964 and who is a certified financial planner, had 24 years of experience as a registered rep prior to his dismissal from Cambridge. He worked for his 14 years at Metropolitan Life Insurance, and spent brief periods with independent brokers NFP Securities and BrokersXpress before affiliating with Cambridge in 2012, according to BrokerCheck.