FREDERICK HOLLOWAY Barred For Unsuitable Recommendations

The Financial Industry Regulatory Authority (“FINRA”) issued Decision #: 201605002401 on April 11, 2019, barring securities representative and owner of Holloway & Associates Inc., Frederick David Holloway, (CRD#: 248814, Easton, Maryland) from the securities industry for making unsuitable annuity recommendations to investors and hiding information from FINRA when it investigated his sales practices. FINRA stated that Holloway violated FINRA Rules including 2330 and 2010.

Holloway & Associates’ Secretary Reports Frederick Holloway’s Suspicious Annuity Exchanges

Evidently, Holloway’s secretary, NL, believed Holloway engaged in bad variable annuity sales practices, and brought her concerns to FINRA’s attention in 2009. NL told FINRA that Holloway harmed clients through unreasonably switching their John Hancock annuities to Transamerica annuities so Holloway could make commissions. FINRA subsequently investigated Holloway.

Apparently, Holloway’s core business came from selling variable annuities; he sold $50,000,000 worth of those products to clients. Supposedly, FINRA focused on his 42 variable annuity exchanges to 39 clients where he pushed investors to exchange (switch) their John Hancock annuities with Transamerica annuities. Apparently, the Transamerica annuities were more expensive when considering the features, riders and subaccounts. Notably, by exchanging the annuities, Holloway caused some clients to pay more than 50% more in contract costs. In 37 of the exchanges, Holloway caused clients to pay surrender penalties. As a result, clients paid $114,470 in surrender charges, and Holloway made $214,989 in commissions.

Frederick Holloway Recommended Annuities Without Disclosing Increased Costs

FINRA stated that Holloway pushed clients towards buying the Transamerica annuities because of a bonus feature. However, Holloway did not determine if the bonus feature was appropriate. Apparently, Holloway thought the bonus features would offset the clients’ surrender penalties. Although this was partially correct, clients still paid increased fees for the Transamerica annuities overall. Evidently, Transamerica warned against Holloway’s strategy specifically because of clients paying increased fees. Notwithstanding, Holloway recommended the exchanges. Moreover, Holloway did not notify clients about the increased costs. The Decision also reported that in some cases, clients lost significant benefits from exchanging the Hancock annuities. Apparently, those benefits were more attractive than benefits offered by the Transamerica annuities.

Evidently, Holloway advised clients to make annuity exchanges without giving them the necessary information to know whether it was worth it. Particularly, Holloway failed to quantify the value of benefits offered by the Transamerica annuities, failing to compare the benefits, costs and fees of the Transamerica annuities with the benefits, costs and fees of the Hancock annuities. Therefore, he did not take into account the benefits and drawbacks of the exchanges for clients. Because of this, FINRA stated that Holloway violated FINRA Rules 2330 and 2010.

Frederick Holloway Makes False Statements To FINRA In Investigation

FINRA also stated that Holloway intentionally withheld information about his variable annuity transactions and submitted false or altered variable annuity documents to FINRA when it investigated him. Supposedly, Holloway tried to conceal his bad sales practices from FINRA to avoid FINRA finding out that he engaged in sales practice violations. As a result, FINRA stated that Holloway violated FINRA Rule 8210.

Lars Soreide Highest Ethical Standard Award 2018

Lars Soreide Highest Ethical Standard Award 2018

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