The Financial Industry Regulatory Authority (FINRA) is ordering H. Beck to pay a $400K fine. The self-regulatory authority (SRO) contends that the independent brokerage firm sold variable annuities (VA) to clients even though they were not suitable for some of them.
According to FINRA, of the over 7,000 variable annuity contracts that H. Beck sold, making almost $34.9M in revenue between 1/2013 and 12/2014:
- 2,835 of those were L-share contracts with quite a number of them tied to long-term riders.
- Some of these L-share contracts were sold to customers that had long-term investment horizons.
VA’s with L-share contracts usually have a surrender period of 3- to 4- four and charge higher fees than other types of variable annuity contracts. Some of them have longer surrender periods. S-share contracts with long-term riders can end up being extended for five years or more for the party holding the variable annuity.
FINRA contends that because H. Beck’s supervisory procedures were not in compliance with SRO, it did not look at suitability when selling the different types of VA classes to its customers, nor did it look at their varying costs and surrender periods, especially when L-share contracts that came with long-term horizons were involved. The SRO is also accusing H. Beck of not properly training its brokers in variable annuities and their suitability for different customers.
Inadequate Supervision
According to H. Beck’s BrokerCheck record, the brokerage firm has 18 disclosures, including one in March 2015 when FINRA fined the broker-dealer $425K, this time over contentions that it did not identify and apply discounts when customers were eligible for them on their unit investment trust purchases. The SRO also accused the firm of not setting up and enforcing both written supervisory procedures and a supervisory system that was designed in a reasonable enough manner to make sure that the sales charge discounts were granted. In 2012, the Massachusetts Securities Division had fined H. Beck $90K for failing to supervise its registered representatives. H. Beck was ordered to reimburse the investor harmed for losses sustained plus interest.
Variable Annuity Fraud Lawyers
At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) our variable annuity fraud lawyers are here to help investors recoup their losses. We have handled many claims accusing brokerage firms of inadequate supervision that resulted in customers losing money because of broker negligence or carelessness. Contact SSEK Law Firm today.