1/00-8-09; CLIENTS STATE THEIR PRIMARY OBJECTIVE WHEN ESTABLISHING THE ACCOUNT(S) WAS THEIR NEED TO WITHDRAW MONTHLY INCOME FROM THE ACCOUNT(S). CLIENT STATES THEY SPOKE WITH THE FA IN MARCH 2002 WHEN THEY ADDED FUNDS TO THE ACCOUNT AND AGAIN STRESSED THEIR PRIORITIES. CLIENTS INDICATE THEY GREW CONCERNED WITH THEIR LOSSES (APPROXIMATELY $6,250) IN 2007. CLIENTS MET WITH THE FA IN 02/2008 TO REVIEW THE ACCOUNTS AND STATE THEY DISCUSSED THEIR RISK TOLERANCE WITH THE FA AND QUESTIONED IF THEY NEEDED TO REALLOCATE THEIR PORTFOLIO. CLIENT'S STATE THE FA ADVISED THEM TO SELL THEIR PUTNAM FUNDS, BUT TO LEAVE THE REST OF THE PORTFOLIO ALONE. CLIENTS ALLEGE LOSSES OF APPROXIMATELY $56,750 IN 2008. CLIENTS MET WITH THE FA IN 07/2009 AND DISCUSSED THE LOSSES IN THEIR ACCOUNT(S). CLIENTS STATE THE FA ADVISED THEM THEY WERE TAKING TOO MUCH MONEY OUT OF THEIR ACCOUNTS. CLIENTS ALLEGE THE ACCOUNTS SHOULD HAVE BEEN ESTABLISHED AS AN INCOME BASED PORTFOLIO AND BELIEVE THAT THEIR NEEDS WERE NOT MET. CLIENTS REQUEST RESTITUTION IN THE AMOUNT OF $65,000.00.

$65,000.00

ACCORDING TO THE FA, HE BEGAN SERVING THE CLIENTS' INVESTMENT NEEDS IN FEBRUARY 2000. HE HAS INDICATED, AT THAT TIME, THE CLIENTS INFORMED HIM OTHER FINANCIAL ADVISORS HAD TOLD YOU TO EXPECT RETURNS AS HIGH AS 20-25% PER ANNUM; HOWEVER, THE FA SUGGESTED THE CLIENTS MIGHT REALISTICALLY EXPECT AN 8% RETURN. THE FA HAS FURTHER INDICATED HE EXPLAINED BASED ON THEIR DISCUSSIONS RELATED TO THE INCOME REQUIRED FROM THE ACCOUNT AS WELL AS THE POSSIBILITY OF ACHIEVING DESIRED RETURNS, HE SUGGESTED A GROWTH AND INCOME BASED PORTFOLIO. ARRANGEMENTS WERE MADE TO WITHDRAW $400.00 PER MONTH FROM THE WIFE'S IRA ACCOUNT AND $1,010.00 PER MONTH FROM THE WIFE'S SINGLE REGISTRATION ACCOUNT. THE CLIENTS INVESTED ADDITIONAL FUNDS IN 2002 IN THE JOINT REGISTRATION ACCOUNT AND EVENTUALLY BEGAN TAKING WITHDRAWALS OF $375.00 PER MONTH FROM THE ACCOUNT. IT IS UNDERSTOOD, IN ADDITION TO THE REGULAR MONTHLY WITHDRAWALS, THERE WERE OCCASIONS IN WHICH LARGER AMOUNTS WERE WITHDRAWN FROM THE ACCOUNTS. THE FA CAUTIONED THE WITHDRAWALS COULD HAVE A NEGATIVE IMPACT ON RETURNS; HOWEVER, THE CLIENT WAS ADAMANT ABOUT THE AMOUNT OF INCOME REQUIRED FROM THE ACCOUNT(S). THE FA HAS STATED HE DOES NOT RECALL ANY CONVERSATIONS ABOUT CONCERNS RELATED TO THE LEVEL OF RISK ASSOCIATED WITH THE INVESTMENTS HELD IN THE ACCOUNT(S) OTHER THAN GENERAL CONVERSATIONS REGARDING MARKET DOWNTURNS. IN ADDITION, HE WAS NEVER ADVISED THAT THE CLIENT'S DESIRE WAS TO HAVE A PORTFOLIO COMPRISED ENTIRELY OF FIXED INCOME INVESTMENTS. BASED ON OUR REVIEW, IT IS OUR OPINION THE FA MADE HIS SUGGESTIONS BASED ON DISCUSSIONS RELATED TO THE CLIENTS' INVESTMENT GOALS AND OBJECTIVES AS WELL AS STATED INCOME NEEDS. IN ADDITION, WE BELIEVE ALL TRANSACTIONS EFFECTED IN THE ACCOUNTS WERE COMPLETED THE CLIENTS' KNOWLEDGE AND AUTHORIZATION. CLAIM DENIED.

THE CLIENT FELT THAT THE INVESTMENTS WERE NOT SUITABLE FOR HER AT HER AGE OF 78. SHE STATED THAT THE BONDS WOULD MATURE IN 35 YEARS, AND ALLEGED THAT SHE NEVER WOULD HAVE PURCHASED THESE INVESTMENTS HAD SHE KNOWN THAT THE MATURITIES WERE THAT FAR OUT. THE CLIENT CLAIMS SHE CALLED WHEN SHE GOT HER FIRST STATEMENTS AND WANTED TO CANCEL THESE INVESTMENTS, BUT THE IR ADVISED HER TO HOLD UNTIL SHE RECEIVED HER FIRST DIVIDENDS. THE VALUE OF THE CLIENT'S INVESTMENTS HAVE DECLINED BY $5,400.

$5,400.00

$350.00

THE IR INDICATED THAT THE CLIENT HAD SEVERAL NEIGHBORS WHO WERE CLIENTS OF THE IR AND OWNED SIMILAR INVESTMENTS. IT IS OUR UNDERSTANDING THAT THESE NEIGHBORS MAY HAVE COUNSELED CLIENT ON INCOME INVESTING AND REFERRED HER TO IR'S OFFICE. IR ADVISED THAT HE PROPERLY DISCLOSED THE FEATURES OF THESE INVESTMENTS TO INCLUDE THE MATURITY, MARKET FLUCTUATION, COMMISSIONS AND THE INSURANCE ASSOCIATED WITH THE MIAMI DADE BOND. IR ALSO STATED THAT HE ADVISED THE CLIENT THAT THE UNIT TRUST WAS NOT INSURED, BUT SINCE IT WAS DIVERSIFIED WITH A NUMBER OF DIFFERENT BONDS, IR FELT THAT THIS ADDED SAFETY TO THE TRUST. THE IR ADVISED THAT HE FELT THE CLIENT WAS AWARE OF THE INVESTMENTS THAT CLIENT WAS PURCHASING AND THAT CLIENT WAS DISAPPOINTED BY THE STEEP MARKET DECLINE REFLECTED ON THE FIRST STATEMENT. THE CLIENT'S REQUEST TO CANCEL THESE TRADES WAS DENIED.****************ARBITRATION RESOLUTION: SETTLED FOR $350.00