Securities Lawyer Blog | Victim of Fraud?

TAG | variable annuity contracts

Nov/12

16

FINRA Enforcing Annuity Sales Rules

Comments off · Posted by Securities Lawyer in FINRA

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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May/12

11

AXA Advisors, LLC, Fined by FINRA for Failure to Supervise Ponzi Rep

Comments off · Posted by Securities Lawyer in FINRA

AXA Advisors, LLC, without admitting or denying the findings, prior to a regulatory hearing and without an adjudication of any issue, submitted a Letter of Acceptance, Waiver and Consent (“AWC”), to the Financial Industry Regulatory Authority (FINRA)which FINRA accepted.  AXA Advisors, LLC, Respondent (AWC 2009020149901, March 13, 2012).

 AXA Advisors, LLC employs aproximately 5,800 registered representatives at 1,300 branch offices;  the firm is a subsidiary of AXA Financial, Inc. (a member of AXA Group).  AXA is a general securities business, primarily engaged in the distribution of mutual funds, variable life insurance and variable annuity contracts.  AXA has no prior relevant disciplinary history.

Registered Representative, Kenneth Neely, began in the securities industry in 1987, and was affiliated with several FINRA member firms. According to FINRA’s allegations, when Neely became associated with  AXA in August 2007, he had been the subject of four customer complaints, including three arbitrations, concerning his business practices at prior employers. AXA was aware that he was experiencing financial difficulties. The AWC alleges that in 2001, while employed at UBS, Neely began a Ponzi scheme, which he continued during his employ with Stifel and then at  AXA, where he persuaded customers to participate in a fictitious “St. Louis Investment Club” and to invest in an equally fictitious real estate investment trust, the “St. Charles REIT.” Following his July 2009 termination by  AXA for admittedly commingling and converting funds, FINRA entered into an AWC with Neely (AWC/20080157230901 /July 23,2009) and Neely was barred from the industry.

FINRA concluded that  AXA’s response to the red flags raised by Neely’s ‘spreadsheet,’ his explanations, and his background, constituted a failure to reasonably supervise him and a further failure to investigate adequately the various indications concerning his misconduct, in violation of NASD Rules 2010 and 2110.

FINRA imposed upon AXA the sanctions of a Censure and $100,000 fine.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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