TAG | annuity fraud
The Financial Industry Regulatory Authority, also known as FINRA, has been enforcing all types of annuity transaction misdeeds nationwide according to recent enforcement reports from the agency, writes Elizabeth Festa in a recent article for LifeHealthPro.com.
FINRA recently censured a firm and fined it $40,000 to settle allegations that the firm failed to maintain required documentation about variable annuity transactions and it’s customers. Sampled transactions of the firm, Allied Beacon Partners, Inc., Richmond, Va., lacked certain customer information or documentation needed in order to make a reasonable suitability determination.
“A large portion of variable annuity transactions sampled revealed the firm’s failure to ensure that a designated principal adequately reviewed and approved the customer’s application prior to its transmission to the issuing insurance company,” FINRA wrote.
FINRA reported that the firm’s Written Supervisory Procedures (WSPs) for variable annuity transactions were deficient. The WSPs identified one individual as having the responsibility to supervise variable transactions, but another individual not identified in the WSPs was actually the primary person responsible for supervising VA transactions, FINRA uncovered.
FINRA’s findings also said that the WSPs did not address how the firm would monitor compliance with SEC Rule 15c2-8, which requires that a prospectus be delivered to customers. The firm was unable to provide any documentation that a prospectus was sent to any of the customers, FINRA alleged.
FINRA also settled a matter involving a registered representative who recommended unsuitable transactions, a mortgage and a variable annuity, to a customer, a 53-year-old widow who worked as an administrative assistant for a public school system. Her annual salary was approximately $55,000, she owned a home unencumbered by a mortgage and valued at approximately $500,000, and she had an investment portfolio valued at approximately $160,000 in retirement accounts and $100,000 in certificates of deposit.
In another recent case, FINRA found that the representative did not have a reasonable basis for recommending that the customer mortgage her primary residence to invest $300,000 in a variable annuity, given that the customer intended to retire in seven years, had limited income, expected an equally limited retirement income and would have an insufficient monthly income to make the mortgage payments.
FINRA concluded that the registered representative’s conduct violated rules of ethical standards and rules concerning recommendations to customers. FINRA fined the representative $5,000 and suspended him in all capacities for 10 business days.
In another FINRA case, a registered representative in Naples, Fla.,was fined $25,000 and suspended from association with any FINRA member in any capacity for three month. He consented to findings that he recommended and executed a variable annuity replacement contract for a member firm customer in a state in which he was not licensed to sell insurance products and included false information in the firm’s electronic books and records.
FINRA’s findings stated that he logged into his member firm’s Web-based system utilized by firm sales staff to complete transaction paperwork for annuity contract purchases reporting that the customer was a New York state resident. When the system rejected the replacement transaction because the deferred VA product was not offered to New York residents and because he did not hold the requisite state insurance license, he listed the customer’s state of residence as Florida.
The National Association of Insurance Commissioners (NAIC) revised its annuity sales model regulation in March, 2010, to provide annuity protections for consumers of any age, (such as the 53 year-old widow), requiring insurer reviews of every annuity transaction, and clarifying that insurers are responsible for compliance with annuity protection provisions — even when insurers contract with third parties.
A Florida regulatory-supported bill died in the Florida Banking & Insurance Committee back in March, 2012. Florida, which has one of the highest senior population rates in the country, would have become the 20th state to enact the revised model law on annuities.
If you or a family member have become alleged victims of annuity or insurance fraud, contact an attorney at Soreide Law Group for a free consultation on how to recover your investment losses. To speak with an attorney, call 888-760-6552, or visit http://www.securitieslawyer.com.
Soreide Law Group, PLLC, representing Insurance Fraud Victims in Federal Court, State Court, and before the Financial Industry Regulatory Authority (“FINRA”).
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Raymond James, FINRA ID # 11-03503 (Bradenton, FL, 8/21/2012)
A split FINRA arbitration panel awarded $985,700, including triple damages, to an elderly customer on his misappropriation claim. This award against Paul David Arnold, and Raymond James and Associates, Inc., of Bradenton, Florida, involved the purchasing of an annuity, electronic transfers and conversion of funds of an elderly person. Some of the charges were: unsuitablity, breach of fiduciary duty, common law conversion/theft, failure to supervise, and exploitation of an elderly person.
The FINRA award states, “exploitation of an elderiy person, Florida Statutes, Sections 825.103(1) and 772.11), Respondent Arnold is liable for $739,320.00 (representing three times the compensatory damages amount of $246,440.00) plus pre-judgment Interest on the compensatory damages amount of $246,440.00 at the Florida statutory rate running from September 12, 2011 through the date of the Award.” Fees were also recovered.
Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.
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A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Wedbush Securities and one of its former brokers to pay $2.9 million in damages and fees to an elderly investor who allegedly fell victim to a faulty investment scheme. The founder Edward Wedbush, and broker Debbie Michelle Saleh were ordered to pay $2,865,885 in damages. The victim of this securities case, Rick Cooper, continued working with Debbie Michelle Saleh, who previously served as his mother’s broker, after she moved to Wedbush from Wachovia Securities LLC in 2004, stated Lorie Konish in an August 31, 2011, article in On Wall Street.
Cooper’s attorney alleges, Saleh sent him false monthly account statements while conducting unauthorized transactions and forging Cooper’s signature. That allegedly included buying unsuitable variable annuities products and selling them, then subsequently buying more unsuitable products.
Konish writes that while Saleh profited from fees and commissions from those transactions, funds in Cooper’s accounts ultimately dwindled to less than a third of the $1.86 million displayed in account statements.
It was noted in a strongly worded Aug. 26 decision, the FINRA arbitration panel concluded that Saleh intentionally misrepresented information about Cooper’s investments while making unauthorized redemptions or withdrawals.
“The panel determined that Respondent Saleh’s conduct was premeditated, egregious and unconscionable and part of a plan or scheme to defraud her customers,” the FINRA panel wrote in its decision. “Respondent Saleh’s conduct certainly borders on criminal misconduct, if not actually elevating her actions to actual criminal misconduct.”
Wedbush fought against the charges in the arbitration, arguing that the variable annuities sold to Cooper were suitable and that the firm’s supervision was adequate.
That supervision was not good enough, Cooper’s lawyer said, as the firm did not promptly respond to a Dec. 2007 letter from the Securities and Exchange Commission following an investigation on Saleh.
Saleh stepped down from her post at Wedbush in March, 2009. She was permanently barred from serving in the securities industry by FINRA in August, 2009. Her registration records show that she has also previously been named in other cases involving annuities she sold to customers.
The On Wall Street article reports that the $2.9 million award includes special damages for emotional distress, including $500,000 to be paid by Saleh, $300,000 by Wedbush and $200,000 by Wedbush Securities founder and President Edward Wedbush.
Including interest, the total award totals more than $3 million.
Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of stock/securities loss, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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