New FINRA Rule to Help Prevent Elder Financial Abuse

On February 5, 2018, a new FINRA rule geared towards preventing financial exploitation of seniors  – also called elder financial abuse – goes into effect. This is new Rule 2165, which creates a limited safe harbor for brokers to put a temporary hold on certain disbursement requests from a brokerage account.

The rule “permits members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers.”  The new rule also amends existing FINRA Rule 4512, to require members to take reasonable efforts to have the customer identify the name of a trusted contact person as part of gathering customer account information. The broker may contact that person if there is a suspicious request for a disbursement of funds. The broker may also contact that person to confirm the customer’s contact information, health status, or identify of any legal guardian, executor, trustee, or holder of a power of attorney.

The new rule permits, but does not require, temporary holds and contacting the trusted contact person. And using it does not necessarily mean a total halt on all disbursements. For example, a broker could put a temporary hold on a suspicious request to transfer funds to an unfamiliar outside account, while still allowing regular bill payments to continue.

This is an important new tool from the Financial Industry Regulatory Authority (“FINRA”) in the fight to curb financial abuse of senior citizens.

Elder financial abuse continues to be a major problem in the U.S., sometimes with devastating results. Fraudsters cheat seniors out of an estimated $3 billion annually. Some believe the dollar figures are up to ten times higher. Nobody is certain of the overall numbers, in part because it is believed that only a small percentage of cases are reported.  Senior financial abuse depletes retirement savings, and it affects our elderly community in other ways.  Studies concentrated on the health effects among those whose essential life savings have suddenly vanished have found that mortality rate can triple. Just think about the stress and emotional impact on a vulnerable senior when his or her financial security is stolen.

State and federal securities regulators are working to prevent elder financial abuse before it happens. But the scammers are out there. What can you do if you or a loved one has been financially exploited?

Contact an attorney experienced in recovering financial losses. In many circumstances, money unlawfully taken can be recovered. In my work as a litigator, I’ve helped curtail and restore money improperly taken from elders in estate and trust disputes among family members. I have helped recover money from brokers “selling away” from their firm, selling unapproved, extremely risky, or even outright fictional investments to unsuspecting elderly clients. We see bad actors unduly influencing seniors to sell undervalued property.  We see seniors (and others) who continue to place trust in swindlers because con artists are good at what they do. We see forged signatures, shady documentation, account statements printed off a home computer, and account figures that just don’t add up. And we fight for the financial abuse victim to recover money where possible. Contacting law enforcement and regulators are additional important resources, and your attorney can advise you on your best options for loss recovery.

As a securities attorney, I represent investors nationwide who have lost money due to the conduct of a financial professional or a defective investment product. I also represent parties in trust and estate disputes where a fiduciary has breached their duties and money is recoverable to the estate, trust, or beneficiary.

The Investor Defenders at Samuels Yoelin Kantor LLP help investors get their money back from brokerage fraud, fraudulent investments, elder financial abuse, and other situations. Our specialized investment litigation practice combines familiarity with complex financial modeling, experience with specialized FINRA arbitration rules and securities laws, and empathy for our clients whose financial losses have become personal.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at 1-800-647-8130. Consultations are free, and confidential.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes.

Investor Alert – NASAA and SEC Warn about Cryptocurrency Related Investments

This past Thursday, the same day I posted about a recent FINRA Investor Alert regarding cryptocurrency, there was a new press release from the North American Securities Administrators Association (NASAA) with further guidance on the same topic. NASAA’s analysis and warning amounts to this:  Initial Coin Offerings (“ICOs”), and all other investment products related to cryptocurrency or the blockchain, pose a threat to investors.

“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a ‘high risk of fraud’ involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.”

The same day, the SEC made a public statement from Chairman Jay Clayton and Commissioners Kara M. Stein and Michael S. Piwowar, in wholehearted agreement with NASAA:  “The NASAA release also reminds investors that when they are offered and sold securities they are entitled to the benefits of state and federal securities laws, and that sellers and other market participants must follow these laws. Unfortunately, it is clear that many promoters of ICOs and others participating in the cryptocurrency – related investment markets are not following these laws. The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment.”

“High risk of fraud”?  That’s a polite understatement. The conditions in this cryptocurrency market are the perfect conditions for bad actors to harm investors and cause investment losses. How? Fraud through market manipulation. Fraud through technical manipulation. Fraud through plain theft. Adverse terms and conditions on a clickthrough agreement. Technical failure, incompetence, malfeasance on the part of the provider. Cyberthreats from third parties online, vandals or burglars. Misrepresentations of the real possibility that cryptocurrency is an object of temporary interest, the bubble will pop, and prices will drop.

And, of course, bad actor conduct includes flawed recommendations by financial advisors to jump in and buy these new, complicated products related to cryptocurrency.  If your portfolio contains investments that, on closer examination, are not plausible or not understandable, that’s one of the ten red flags of financial fraud.

As a securities attorney, I represent investors nationwide who have lost money due to the conduct of a financial professional or a defective investment product.

The Investor Defenders at Samuels Yoelin Kantor LLP help investors get their money back from brokerage fraud, fraudulent investments, elder financial abuse, and other situations.  Our specialized investment litigation practice combines familiarity with complex financial modeling, experience with specialized FINRA arbitration rules and securities laws, and empathy for our clients whose financial losses have become personal.

If you have concerns about how your money is being handled by your financial professional, or if your broker has stopped returning your calls, contact me for a free, confidential consultation at 1-800-647-8130.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice also includes representing investors nationwide in investment disputes.

Investor Alert – Cryptocurrency Stock Scams

FINRA recently released an Investor Alert on cryptocurrency scams. Investors should be wary of jumping into this “hot,” volatile sector, and do their research before handing over their money to a potential fraudster, or for a risky investment that they don’t understand.

In the last quarter, cryptocurrencies such as Bitcoin and Ripple have received a fresh burst of press attention. This includes reporting on massive price swings up and down, and stories of overnight millionaires. According to the media, a Welsh man who spilled lemonade on his laptop in 2013 and absentmindedly threw the hard drive away now wants to mine the local dump for the hard drive. Why? It contained the key to access his lost Bitcoin fortune said to be worth $100 million — but only if he finds it and if the drive is still operational.  It’s a good metaphor for Wild West, gold rush atmosphere of the whole cryptocurrency hype.

With this Investor Alert, and other recent warnings, FINRA points out that:

According to a December 11, 2017, public statement from SEC Chairman Jay Clayton, the number of such investments registered with the SEC is ZERO. “Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies.”

As a securities attorney, I represent investors nationwide who have lost money due to the conduct of a financial professional or a defective investment product.

The Investor Defenders at Samuels Yoelin Kantor LLP help investors get their money back from brokerage fraud, fraudulent investments, elder financial abuse, and other situations.  Our specialized investment litigation practice combines familiarity with complex financial modeling, experience with specialized FINRA arbitration rules and securities laws, and empathy for our clients whose financial losses have become personal.

If you have concerns about how your money is being handled by your financial professional, or if your broker has stopped returning your calls, contact me. Consultations are free and confidential. Call 1-800-647-8130 now.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice also includes representing investors nationwide in investment disputes.

Raymond James Fined $2 Million by FINRA for Supervisory Failures

On December 21, 2017, the Financial Industry Regulatory Authority (FINRA) announced it had fined brokerage firm Raymond James Financial Services, Inc. $2 million for significant supervisory failures in reviewing email communications. FINRA found that, over a nine-year period, Raymond James did not have a reasonably designed supervisory system and procedures for reviewing email communications.

Why is email review important? Under FINRA rules, brokerage firms must reasonably supervise all electronic communications technology used by a firm and its brokers to conduct firm business.  Many firms used a risk-based approach to supervision, automatically searching for key words and phrases in emails. This review is important for firms to catch bad conduct, such a broker involved in unapproved “outside business activities,” or conducting securities transactions that are not approved by the firm, also known as “selling away.” 

Brokers engaging in “selling away” sometimes create their own spreadsheets and account statements to mislead customers into thinking that recommended investments are approved by the brokerage firm. Often those investments are especially risky, inappropriate for the particular investor, and very lucrative for the seller. For example, it is not uncommon for a seller to receive a 7 – 10% commission on a sale of a private placement investment like a limited partnership (LP) interest. The most slick-looking investment pamphlet could be an outright investment fraud … with the check going straight to the seller’s pocket.

Firms must actively maintain supervisory procedures reasonably designed to catch such unlawful conduct, and protect its customers.  Email supervision, office audits, and document review are only a few of the ways firms should be monitoring the activities of its brokers.

Under FINRA rules and the applicable state or federal law, a brokerage firm can be held financially liable to the customer for the losses caused by its bad actor brokers.  And, for the firm’s own supervisory failures.

If you believe you are the victim of “selling away,” negligent portfolio management, churning, securities fraud, or other unlawful conduct by your financial professional, contact the SYK Investor Defenders team at 1-800-647-8130 for a free, confidential initial consultation.

You may be able to recover financial losses caused by your financial professional.  An experienced securities attorney will fight on your side.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice also includes representing investors nationwide in investment disputes.

New FINRA/SEC Report: Sales Practices Targeted at Seniors

As part of the “National Senior Investor Initiative”, in 2013 FINRA and the SEC conducted 44 examinations of brokerage firms that focused on how firms conduct business with senior investors (defined as age 65 and older) as they prepare for and enter retirement.  A newly issued report gives the results.

The exams found that among the top five revenue-generating securities based on sales to senior investors were the following:

  • Open-end mutual funds (77% of the examined firms)
  • Variable annuities (68% of the examined firms)
  • Equities (66% of the examined firms)
  • Fixed income investments (25% of the examined firms)
  • Unit Investment Trusts (UITs) and Exchange Traded Funds (ETFs) (almost 25% of the examined firms)
  • Non-traded REITs (almost 20% of the examined firms)
  • Alternative investments such as options, exchange-traded notes, hedge funds, private placements, Business Development Companies (BDCs), and leveraged inverse ETFs (about 15% of the examined firms)
  • Structured products such as structured notes and other market-linked securities, reverse convertible notes, principal-protected notes, and collateralize debt obligations. (11% of the examined firms)

Variable annuities, UITs, ETFs, non-traded REITS, alternative products and structured products often carry increased risks of investment loss and penalties for early withdrawal or an inability to liquidate that are inappropriate for senior investors needed access to retirement funds. These are complicated products that are not always explained when sold to investors. And many of these products are inappropriate for an individual retirement account (IRA). Variable annuities in retirement accounts are often completely unsuitable because any tax advantages of those products are lost in an IRA account.

The report notes that in the 44 exams:

“Staff found evidence indicating that 34% of the [examined] firms made one or more potentially unsuitable recommendations of variable annuities.”

“Approximately 14% of firms made potentially unsuitable recommendations to purchase alternative investments, which can be difficult to value, involve high purchase costs, have limited historical data, and often lack liquidity. For example, at one firm, representatives failed to consider the age (90) and low income of one investor, and the limited investment experience and ‘growth and income’ investment objectives of another. These senior investors held the positions for less than ten days and experienced significant realized losses.”

If you are a senior investor concerned about your investment portfolio or particular products, contact us for a free consultation.

Investor Defender attorneys Robert S. Banks, Jr. and Darlene Pasieczny represent investors in securities industry disputes in FINRA arbitrations across the U.S.   Bob Banks himself has over 33 years of experience in securities litigation and FINRA arbitration, and has served multiple times on the National Arbitration and Mediation Committee, an advisory board to FINRA on its rules, regulations, and procedures.  We know the rules, and we fight for our clients in recovering investment losses.

Previous posts on investment products:

Are FINRA Arbitration Hearings for Securities Disputes Public Record?

We are sometimes asked whether FINRA arbitrations are public.   Anyone can go to a courthouse and observe a hearing or trial unless there are good reasons for the court to order the proceeding closed to the public. However, FINRA arbitration hearings are private proceedings.   That means that only the parties and their attorneys, expert witnesses and the arbitrators may attend the entire arbitration hearing. Fact witnesses are called, but normally they are only present during their own testimony.  Members of the public and other interested persons are generally not allowed to attend FINRA arbitration hearings. Even regulators are not permitted to attend FINRA arbitrations.

While FINRA Awards issued by arbitrators are publicly available through the FINRA Awards Online Database, all materials submitted to FINRA by the parties in a case (such as the Statement of Claim and Answer) are deemed “confidential” and are not made publicly available by FINRA. While an Award will usually give a brief outline of the claims and allegations, the arbitrators are not required to give their reasoning for a decision unless both sides request it. Combined with the private proceedings, that makes it very difficult for a claimant (or attorney unfamiliar with securities claims in FINRA arbitration) to research and understand how similar claims may have been made and argued in other cases.

Having an Attorney Familiar with Securities Claims in FINRA Arbitration Matters

Attorneys Robert S. Banks, Jr. and Darlene Pasieczny use their experience representing claimants in FINRA arbitration across the U.S. at every step of the process, including evaluating claims before filing a case and understanding the procedural rules for effective advocacy. And we are sitting right next to our clients throughout the entire arbitration hearing. As senior counsel, Robert S. Banks, Jr. personally has over 32 years of experience representing investors in FINRA (formerly NASD) arbitration, and has served on FINRA’s own rule-making committees for a deep knowledge of the process.

Do You have a FINRA Arbitration Claim?

Most securities industry disputes – whether an individual investor suing a broker or brokerage firm for improper conduct such as churning an account, negligence, margin calls, unsuitable recommendations, failure to supervise, unauthorized trading, or misrepresentation of an investment, or an intra-industry dispute by a broker against a firm for improper termination, unpaid wages, promissory notes, or form U5 reporting – are handled through FINRA Dispute Resolution and FINRA arbitration. That’s because pre-dispute arbitration clauses are found in almost all brokerage account agreements and registered representative agreements with brokerage firms. A series of U.S. Supreme Court decisions over the past few decades have upheld that those arbitration clauses are usually binding and enforceable.

Investor Defender attorneys Robert S. Banks, Jr. and Darlene Pasieczny at Samuels Yoelin Kantor have the knowledge you want in fighting for investment loss recovery or intra-industry disputes. Our clients include institutional investors, pension funds, municipalities, fiduciaries, as well as individual investors. For a free initial consultation and more information about Samuels Yoelin Kantor’s Investor Defenders litigation team and securities litigation visit: https://investordefenders.com/

FINRA Sanctions Oppenheimer $3.75 Million for Failure to Supervise Ex-Broker Mark Hotton

FINRA announced on March 26, 2015 that it had fined brokerage firm Oppenheimer & Co. Inc. $2.5 million and ordered it to pay $1.25 million in restitution based on failing to supervise its former registered representative Mark Hotton.  Hotton was permanently barred from the securities industry in August, 2013 after stealing money from his clients and excessively trading in client accounts. FINRA found that Oppenheimer had failed in its supervisory responsibilities because the firm: failed to adequately investigate Hotton’s background prior to hiring him (missing the seven customer complaints and other criminal charges); failed to put Hotton on heightened supervision despite knowing that his business partners had sued him for several million dollars based on fraud allegations; failed to respond to “red flags” such correspondence and wire transfer requests that showed Hotton was wiring funds from Oppenheimer client accounts to entities owned or controlled by Hotton; and failed to respond to “red flag” internal surveillance that showed Hotton was trading in client accounts at presumptively excessive levels.

The sanction also reflects FINRA’s frustration with Oppenheimer, which failed to make more than 300 required filings to FINRA about Hotton and other brokers in a timely manner, and failed to provide timely responses to requests for information.

Hotton’s FINRA BrokerCheck report shows 30 reported disclosure events including 24 customer disputes and 2 criminal events.

Samuels Yoelin Kantor LLP attorneys Robert S. Banks, Jr. and Darlene Pasieczny have over 35 years combined experience in representing investors in securities industry disputes in court and FINRA arbitration across the United States. Our clients include institutional investors, pension funds, municipalities, fiduciaries such as trustees, as well as individual investors. If you have concerns about your financial advisor or investment portfolio, contact us. For more information about SYK’s Investor Defenders litigation team and securities litigation, visit our investment claims page.

Investor Rights Update: Investor Choice and a Uniform Fiduciary Standard

Investor Choice. Since 1987, when the Supreme Court decided McMahon v. Shearson Lehman Brothers, investors have been denied their Constitutional right to a jury trial. Instead, if they have lost money through the fraud or negligence of a FINRA-licensed stockbroker, financial advisor or brokerage firm, investors are required to bring their cases through the FINRA arbitration process. Although we have seen benefits for many of our clients in using the FINRA arbitration forum over the last 23 years, some cases are better resolved in court by a judge and jury. Investor Choice simply allows investors to choose between FINRA arbitration and court. Congressman Ellison from Minnesota has introduced the Investor Choice Act, which would give investors that choice. There is no legitimate reason for barring investors from the courthouse doors. Congress should side with individuals and not with Wall Street firms. Call your representatives and urge them to support Investor Choice!

Uniform Fiduciary Standard. A fiduciary standard requires nothing more than putting the investor’s needs ahead of the brokerage firm. That is what investors expect from a financial adviser, and that is what brokerage firms claim to provide. But, that is not what happens in reality. PIABA prepared and distributed to Congress and the press a compelling report that collected advertisements of brokerage firms, all of which declare that they put investors first. When those same firms face FINRA arbitration claims from investors for mismanagement and fraud, however, they deny that they owe any fiduciary obligations to their clients. The PIABA report includes specific examples of the defenses that the firms file. We see the same tired defense routinely raised when we include claims for breach of fiduciary duty. The Wall Street firms claim that their only obligation is to make “suitable” investment recommendations.

What’s the difference between a suitability standard and a fiduciary standard?

Commissions and fees. A suitable investment must be in line with an investor’s investment objectives and risk tolerance levels, but it need not necessarily be in the investor’s best interest. Say that there are two mutual funds, each consisting of a similar broad mix of stocks and bonds. One charges the investor a 3% commission and the other 1%. Under the pure suitability standard, the financial advisor may be able to recommend only the higher commissioned product, even if he is fully aware of the lower cost fund and it is readily available. Under a fiduciary standard, he could not. Does that matter? It does. The White House issued a report recently that explained that even a 1% difference in commissions results in many thousands of dollars in the value of a retirement account over time. Jason Zweig, an insightful columnist on investor issues at The Wall Street Journal, has made similar observations. Currently, registered investment advisors are held to a fiduciary standard, but financial advisers who work at a brokerage firm are not, at least under federal law.   Investors don’t know the difference between investment advisors who are registered with the SEC and financial advisors who are FINRA licensed.  And, practically speaking, there is no difference. Both provide investment advice to their clients. SEC Chairperson Mary Jo White and the White House have stated that we need a uniform federal fiduciary standard for all advisers, whether they are FINRA licensed or SEC registered. PIABA agrees, and I agree. You should too. The claims of the financial services industry that a fiduciary standard would prevent middle class Americans from getting financial advice is bunk. Many states, including Oregon and California, already impose fiduciary obligations on advisers that advise their clients on what investments to make, and investors in those states get the same advice and service as investors in non-fiduciary duty states.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

New FINRA Report: $50 Billion Lost Yearly to Financial Fraud… Victims Suffer “Non-Traditional” Costs as Well as Direct Financial Losses

The FINRA Investor Education Foundation issued a new research report, “Non-Traditional Costs of Financial Fraud,” based on a survey of 600 self-reported fraud victims. The survey details the emotional tolls and indirect costs (bounced checks, lost wages, lost opportunities, bankruptcy filings) that may come from losing money in a fraud.

Victims who lost the greater amounts in the financial fraud reported greater levels of interaction with the fraudster (e.g. communicating many times, filling out lots of paperwork, etc.) And the most frequently cited ways victims came into contact with the fraudster was through a friend or family member (18%) or a professional contact (13%).

Other significant survey results:

  • 19% of survey respondents reported having between $50,000 and $100,000 invested in non-retirement securities accounts
  • 40% of the survey respondents reported having more than $100,000 invested in non-retirement securities accounts

When asked whether they felt they had been defrauded in certain “red flag” scenarios, the survey participates responded:

  • 28% “yes” and 19% “maybe” to having been defrauded by investing in a product or service (e.g. a vacation timeshare, annuity product, etc.) that they learned about from a free lunch seminar
  • 23% “yes” and 17% “maybe” to having been defrauded by a stranger who called on the phone to offer an investment opportunity
  • 15% “yes” and 18% “maybe” to having been defrauded in an investment that guaranteed a daily rate of return of over 10%
  • 13% “yes” and 14% “maybe” to having been defrauded in an investment that involved a promissory note
  • 13% “yes” and14% “maybe” to having been defrauded by someone offering “Prime Bank” or “bank guarantee” investments
  • 13% “yes” and 14% “maybe” to having been defrauded in an investment that involved oil or gas exploration

Only 35% of victims reported the incident to some kind of authority. For those who didn’t report, the most common reasons were feeling like it wouldn’t make a difference, wanting to put it behind them, and being embarrassed.   Self-blame was a common reaction: 61% agreed with the statement that “I was defrauded because I was too trusting”. Anger, feelings of betrayal, and high stress were also highly reported by fraud victims.

The survey results are no surprise to the securities litigation & FINRA arbitration attorneys at Samuels Yoelin Kantor LLP, who have combined over 35 years of experience in recognizing, advising, and recovering investment losses due to securities fraud, broker negligence, defective investment products, or other unlawful conduct across the country. “Victims of investment fraud often feel they were at fault for trusting the recommendations of their financial advisor, or they don’t want to “make trouble” for their advisor despite significant red flags,” says SYK attorney Darlene Pasieczny. “But acting quickly for a second opinion or consultation with a securities attorney can mean the difference between losing an entire retirement savings or recovering enough to rebuild and regain peace of mind.”

In addition to the red flag scenarios noted above in the FINRA survey results, other red flags might include:

  • Discovering that you can’t easily sell an investment that you thought you could
  • Excessive trading or high fees charged in an account
  • Pressure from a financial advisor to make investment decisions quickly or without understanding the investment or paperwork you are asked to sign
  • Having a lot of “alternative investments” like non-traded REITs, private placements, and interests in limited partnerships in your portfolio
  • Having multiple accounts opened for you without a clear explanation why
  • Seeing a swing in portfolio value of more than 10% in any account statement when you are a conservative or moderate investor
  • Having investments that don’t appear on your brokerage company’s account statements

Contact the Investor Defender attorneys Robert S. Banks, Jr. and Darlene Pasieczny at Samuels Yoelin Kantor if you have concerns about your financial advisor or securities portfolio. We have the experience of representing over 850 clients in securities arbitration (now FINRA arbitration) and court, and our clients include individual investors from all backgrounds and across the United States, as well as pension funds, fiduciaries, municipalities, retirement plans, and other institutional investors.

SWS Financial Services Faces FINRA Charges For Improperly Supervised Sales Of Variable Annuities

Investment News reported today that SWS Financial Services is facing charges regarding its sale of variable annuity applications. The Financial Industry Regulatory Authority’s (FINRA) complaint alleges that SWS gave the go ahead on numerous variable annuity applications without principal review for suitability.

FINRA requires that firms have supervisory systems and written procedures to supervise VA transactions. The Sept. 29th complaint includes the following allegations:

  • Inadequate supervisory systems and written supervisory procedures to supervise VA business,
  • Inadequate supervisory reviews of VA deals,
  • Failure to have registered principal review of VA’s before submitting the application to the insurer
  • Failure to have surveillance procedures to detect inappropriate VA exchanges
  • Failure to develop and document a specific training plan for supervisory review of VA deals to

According to FINRA’s report, variable annuity sales made up 16-20 percent of the firm’s total revenue during the period of review (Septermber 2009-May 2011).

Bob Banks has years of experience representing investors who were sold variable annuities that were misrepresented. These are extremely complex and confusing products and in our experience, even the brokers who have sold them often do not understand how variable annuities work.