Variable Annuities

Ameriprise Subsidiary RiverSource Fined $5M For Allegedly Improperly Switching Customers’ Variable Exchanges To Earn Commissions

Published on: June 8, 2022 | by Shepherd Smith Edwards & Kantas, LLP

RiverSource Distributors Accused of Targeting Retail Ameriprise Financial Customers With VA Sales

The US Securities and Exchange Commission (SEC) is ordering Ameriprise’s subsidiary brokerage firm, RiverSource Distributors, to pay a $5M fine for alleged violations involving variable annuities (VAs). The regulator contends that several RiverSource employees came up with a sales strategy that caused holders of these products to switch annuities. This purportedly resulted in enhanced sales commissions and boosted VA sales revenues for the firm.

The SEC said that RiverSource Distributors sold the VA exchanges to retail customers through Ameriprise Financial Services. It charged RiverSource with “improper switching or replacing variable annuities.” The case is the SEC’s first-ever enforcement proceeding under the Investment Company Act of 1940’s Section 11.

Transamerica To Pay $8.8M Over Unsuitable Mutual Fund, 529 Plans, and Variable Annuity Sales

Published on: January 5, 2021 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Settlement Includes Restitution to More than 2,400 Customers

In an agreement reached with the Financial Industry Regulatory Authority (FINRA), Transamerica Financial Advisors consented to pay $8.8M over the unsuitable sales of mutual funds, variable annuities (VAs) and 529 savings plans to customers.

$4.4M of this is a fine and $4.4M is restitution to about 2,400 customers who were financially harmed. The firm settled with FINRA but without denying or admitting to its findings.

Customers Blame Ex-Wells Fargo Broker Clearing Services Herbert Weith For Variable Annuity Losses

Published on: December 28, 2020 | by Shepherd Smith Edwards & Kantas, LLP

New FINRA Arbitration Claim Seeks $260K in Damages

Former Wells Fargo Clearing Services (WRET) broker Herbert Lee Weith IV is named in yet another customer dispute in which the claimant is seeking damages for losses involving variable annuities. Weith, who was a Wells Fargo broker from 2012 to 2019 in Naples, Florida, became a registered investment advisor for Equitable Advisors, LLC, in Columbia, Maryland from January to October of 2020.

Our Florida broker fraud attorneys have been looking into complaints by ex-Wells Fargo customers of Weith who suffered serious investment losses that may have been caused by unsuitable investment recommendations. Contact our attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today.

AXA Financial Ordered to Pay $3.2M to Farming Family

Published on: May 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An egg-farming family based in New York has been awarded $3.2M in its Financial Industry Regulatory Authority (FINRA) arbitration claim against AXA Financial. The claimants are an older couple, Sandra and James Fitzpatrick, who own Fitzpatrick Poultry Farm. They contend that Franceso Puccio, an ex-AXA Financial broker, placed their money into variable annuities (VA), which were unsuitable for them. Puccio has already been convicted for senior investor fraud involving another elderly client that was also with the firm.

The couple are claiming that they lost millions of dollars because of the way AXA and Puccio handled their funds. They contend that their money had been invested in mutual funds until Puccio moved their funds, as well as four life insurance policies, into VAs.

Puccio worked in the securities industry for 16 years. He was barred by FINRA in 2015 after he failed to turn over information and documents that the regulator had requested related to an investigation into whether he had converted monies from a non-customer. Puccio’s BrokerCheck record notes several customer disputes, with allegations including unsuitable investments sold to claimants, negligence, breach of fiduciary duty, misrepresentations, and omissions.

Former Alexander Capital Broker Accused of Churning Must Pay Over $302K

Published on: March 12, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has secured a final judgment against ex-Alexander Capital broker William Gennity, who is accused of excessive churning in clients’ brokerage accounts. Gennity, whom the Financial Industry Regulatory Authority (FINRA) had earlier suspended, will pay nearly $128K in disgorgement, nearly $15K in prejudgment interest, and a $160K civil penalty.

The SEC’s complaint accused Gennity of recommending costly, “in-and-out trading” to four clients between 7/2012 and 8/2014 without having any reasonable grounds for thinking that doing so would cause them to make money. Instead, they lost money as a result, while Gennity made money. The alleged churning purportedly took place while he was an Alexander Capital broker.

Churning typically involves a broker engaging in trades in order to earn more commissions.

SEC Bars Former Wells Fargo Broker Over Alleged $1.3M Senior Investor Fraud

Published on: March 11, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Just a few weeks after former Wells Fargo (WFC) broker John Gregory Schmidt consented to a final judgment in the US Securities and Exchange Commission’s (SEC) investor fraud case against him, the regulator announced that it has barred Schmidt for misappropriating more than $1.3M from clients, most of them elderly retired investors. Schmidt, who also ran Schmitt Investment Strategies Group in Ohio and was already barred by the Financial Industry Regulatory Authority (Finra), was fired by Wells Fargo in 2017. In a parallel criminal case, he is also charged with 128 felony counts over the same fraud allegations.

The SEC’s complaint notes that at the time that Wells Fargo fired Schmidt, he had about 325 retail brokerage customers. At least half of them had worked with him for over a decade, and a “significant percentage” were retirees who depended on regular withdrawals from their brokerage accounts to cover their living expenses. Many of them were unsophisticated, inexperienced investors, some of whom were suffering from dementia, including Alzheimer’s disease.

Schmidt’s scam purportedly involved making unauthorized sales and withdrawals involving variable annuities from certain customers’ accounts and then using fraudulent authorization letters to move the money to the other clients’ accounts. According to the Commission’s complaint, between ’03 and ’17, Schmidt took money out of seven clients’ accounts and moved the funds to the accounts of other clients to conceal shortfalls there.

Retirement Losses: First Allied Securities and Financial Adviser to Pay Retirees Over $1.6M for Investment Advice, MetLife to Pay Another $189M to Individuals Owed Pensions, and Duke University Will Pay Over $10M to Settles Lawsuits Alleging ERISA Violations

Published on: February 4, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investors Alleging Negligence and Mishandling of Their Retirement Funds Win FINRA Case

A Financial Industry Regulatory Authority (FINRA) panel arbitration is ordering First Allied Securities and financial adviser Larry Glenn Boggs to pay claimants and early retirees Nita and Mike Snow over $578K in compensatory damages, $500,000 in punitive damages, $350K in attorney’s fees, and $60K in other costs related to losses they sustained. Boggs had worked with the Snows on their early retirement plan, which included investing in the Sun America Life-issued variable annuity the Polaris Advantage II and other investments.

In their securities arbitration claim, the Snows sought compensation from Boggs, First Allied Securities, First Allied Advisory Securities, and American Retirement Solutions of Louisiana, LLC. All of them denied wrongdoing.

CFD Investments Ordered to Pay $125K Fine Over the Inadequate Supervision of Variable Annuity Sales

Published on: January 21, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering CFD Investments to pay a $125K fine over what the self-regulatory authority (SRO) found to be the inadequate supervision of its registered representatives when they sold variable annuities(VAs) to customers. FINRA said that between 7/2014 and 7/2016 the broker-dealer did not set up, keep up, or enforce written procedures or a supervisory system designed in a reasonable enough manner that would allow the firm to properly oversee these transactions.

The SRO found that of the 1,574 VA purchase and exchanges made by the firm during the period in question, over 18% of them were L-share contracts, most of which came with long-term riders. However, according to FINRA, many of broker-dealer’s customers that bought these shares wanted a long-term investment horizon and would have benefited more from being sold B-share contracts. Also, unlike L-share contracts, B-share contracts don’t come with 30-50 basis point annual fees.

Inadequate Supervision and Inappropriate Recommendations

H. Beck Ordered to Pay $400K for Unsuitable Variable Annuity Sales to Customers

Published on: November 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.

FINRA Cases: Ameritas to Pay $180K Fine Over Variable Annuity Sales, UBS Ordered to Pay Former Broker $3M for Defamation, and 13 Investors Awarded $5M After Losses Allegedly Caused by Ex-LPL Financial/Edward Jones Broker

Published on: November 4, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ameritas Investment Corp. Must Pay $180K for Inadequate Supervision Involving VA Sales
The Financial Industry Regulatory Authority is ordering Ameritas to pay $180K for an inadequate supervisory system that oversaw its multi-share class variable annuity sales. The self-regulatory organization claims that between 9/2013 and 7/2015, the brokerage firm failed in its supervision of the VA sales and did not have adequate written supervisory procedures in place.

It was during this period that the firm sold almost 4,100 variable annuity contracts, making more than $58M in the process. 697 of the sales were L-share contracts, rendering approximately $11M. These types of contracts usually come with a shorter surrender period than the more common B-share contracts. FINRA believes that the broker-dealer failed to provide its registered representatives proper guidance on the different share classes that were for sale or on how to discern which ones would be best for each customer.

Fired Broker Will be Paid $3M by UBS
A FINRA arbitration panel is ordering UBS Financial Services (UBS) to pay $3M in compensatory damages to a broker that it fired. The Claimant, James L. Springer, had made numerous claims, including wrongful termination, emotional distress, negligence, unfair competition, breach of fiduciary duty, unpaid wages, and others.