LPL, Broker Beat Doctors’ $5.8 Mln Claim, But Broker’s Record Stays Scarred
(Updates with comments from broker in fifth and sixth paragraphs)
A Financial Industry Regulatory Authority arbitration panel has dismissed a $5.8 million claim from ophthalmologists against LPL Financial and an advisor who the customers allege put them inappropriately into precious metals and cash, but the arbitrators declined to expunge the complaint from his regulatory record.
The award decision, dated Sept. 6, does not explain the arbitrators’ reasoning, but a lawyer for the Nashville-based doctors said the three-man panel apparently bought the argument from LPL and broker Kenneth M. Ford that the customers should have understood the brokers’ investment philosophy from scrutinizing their account statements.
The doctors individually, and as trustees of Cornea Consultants of Nashville’s retirement plans, asserted that Ford, LPL and its registered investment advisory affiliate Private Advisor Group violated fiduciary requirements and misrepresented investments by moving their pension and personal accounts almost entirely into cash, gold and precious-metal related investment vehicles between 2010 and 2013 without adequate notice, according to Thomas Chase, their lawyer at Rottenberg Lipman Rich, P.C. in New York.
“We are heartbroken,” said Chase, noting that the approximately 40-person medical practice lost over $1 million dollars as gold prices plunged in one year while equity indexes rose. “Our guys weren’t aware, because the front of their statements said equities, and you had to dig in to see it was gold-related.”
Ford, a 21-year brokerage industry veteran who runs a practice in Orange County, New York, said in an e-mailed statement that he and his lawyers proved during the hearing that he had followed a consistent investment strategy for over a decade and that the investors were “well aware” of how their accounts were invested.
“I am pleased with the FINRA arbitration panel’s decision to deny these claims in their entirety,” he wrote. “[W]e put on proof that taking into account all of the accounts over the life of the relationship – as opposed to the cherry-picked time frame put at issue by Claimants – Claimants’ combined accounts enjoyed a net profit during the relationship. After hearing my testimony for several days, and all the other proof, the arbitration panel rejected Claimants’ claims and awarded no damages. I believe that this was the appropriate result.”
He did not address the three arbitrator’s unanimous decision to deny his request for expungement of the customers’ claims.
The doctors, for their part, are not celebrating the expungement denial because their issue was more against LPL for allowing account statement misrepresentation than against Ford, according to their lawyer.
“They had no personal vendetta to get this guy,” Chase said, noting they had worked with Ford for several years before he veered into his gold-centered philosophy. “They aren’t vengeful people. Their anger is really at the company.”
He repeated that Ford adopted a goldbug-like strategy without clear explanation, and said that the advisor traded heavily in the doctors’ personal and retirement plan accounts, which were fee-based and discretionary, based on signals from off-the-shelf software.
Spokespeople at LPL and at Private Advisor Group did not reply to requests for comment.
Amy Sterling, a lawyer at Bass Berry Sims in Memphis, which represented the broker and the firms, said the clients were “very happy” about the denial of the doctors’ claims but said she could not discuss the expungement claim that she did not personally argue.