An Ameriprise advisor has been fined and temporarily suspended by FINRA, and the brokerage was censured and fined as well after an investigation detailed how the advisor altered documents of a client he faced in arbitration hearings, and the firm knowingly kept quiet about the changes.
The investigation by FINRA stems out of a 2008 arbitration case between Minneapolis-based Ameriprise advisor David B. Tysk and a former client, Guenther Roth, who complained that Tysk had advised and bought more than $2 million in unsuitable annuities with his fixed-income account.
It was during that arbitration hearing that Roth questioned computer notes presented by Tysk of his contacts with him, FINRA investigators noted. According to the regulatory agencys investigation, Roth became suspicious that the notes seemed to be too-perfectly tailored to the defense of his claim.
In 2009, the arbitration panel awarded Roth $480,000 in compensation, including damages, legal and hearing fees, and referred the matter to FINRAs Member Regulation Department for a disciplinary investigation, which was summarized in a hearing panel decision published Oct. 13.
FINRAs decision noted that Roth asked to examine Tysks notes for alterations during the arbitration hearing, but was stonewalled by the advisor and Ameriprise. Tysk didn't say anything about changes made to his notes for months, FINRA added, until he told Ameriprise officials what he had done in a prepatory arbitration hearing. Nonetheless, neither Ameriprise nor Tysk informed [Roth] that the notes had been altered, the decision noted.
The note changes were discovered after a mandated forensic examination of Tysks computers hard drive revealed substantive edits that Tysk has made to the notes after receiving [Roths] complaint letter.
The panel noted that Tysk has not expressed remorse [and] falls short of acknowledging misconduct and accepting responsibility. He was fined $50,000 and given a three month blanket suspension from any financial advisory activity.
FINRA fined Ameriprise $100,000 for wrongful conduct [that] was intentional, persisted over a period of months, and was inconsistent with the principles of fairness promoted by the rules governing the arbitration discovery process. The financial firm protested the panels conclusions.
We strongly disagree with the decision, which focused on alleged technical violations that occurred in discovery during a 2009 arbitration, said John S. Brine, vice president of public relations at Ameriprise. We always make it a priority to follow all rules regarding discovery in FINRA arbitrations and this case was no exception.
In a statement to the panel, Tysk said that in retrospect, had I known the impact on the arbitration of choosing my contact note system to keep this history, I would have simply created a separate document entitled supplemental notes.
Tysk did not return a call for comment left at his advisory practice in Eden Prairie, Mn. However, a person with knowledge of the matter said that Tysk was disappointed with the decision and planned to appeal. Brine said that Tysk remains with Ameriprise.
FINRA arbitration experts said they could not recall an example of a case involving doctored files before an arbitration panel and an intentional effort to keep it from a complainant.
Personally, I think this is as bad as it gets, said Ronald J. Colombo, associate dean for academic affairs at the Hofstra University School of Law, and a regularly serving FINRA arbitrator.
Colombo added that the case was illustrative of the informality of FINRA arbitration hearings. Its pretty much a black box about what goes on. A lot of these matters are resolved through best efforts and informally among parties.
The panel does not conduct its own investigation, Colombo added. It relies on parties to present cases. A panel does have an obligation to report to FINRA if there is reasonable suspicion of something wrong, but thats a high threshold. Its a volunteer panel, and it is going to rely heavily on the parties to lead them on the evidence.
Marc Dobin, a securities attorney based in Florida, marveled that Tysk was not facing any action from Ameriprise.
That stuns me that Ameriprise would keep a guy they knew altered documents because thats a sign that he cant be trusted, Dobin said. Ive seen brokers terminated for a lot less.
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