Northwestern Mutual Investment Services Fined For Inadequate Supervision

Former Financial Representative Is Facing Criminal Trial for Annuity Fraud

The Financial Industry Regulatory Authority (FINRA) has fined Northwestern Mutual Investment Services $350K for failing to properly supervise former stockbroker, Sampson Pearson, which enabled him to defraud customers of $570K. Northwestern Mutual Investment Services is the brokerage arm of Northwestern Mutual Life Insurance Co.

Pearson, who was barred by the self-regulatory organization (SRO) in 2017, is charged in federal court with aggravated identity theft, mail fraud, and filing false tax returns. According to his BrokerCheck record, he is named in 13 disclosures, including 11 customer disputes.

Our broker fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) are investigating customer claims involving Sampson Pearson. Contact SSEK Law Firm today.

Sampson Pearson Accused of Stealing From 10 Annuity Investors

From 2001 to 2017, the former stockbroker was an independent contractor in North Carolina for Northwestern Mutual Investment Services. During this time, he allegedly defrauded 10 of the firm’s clients by stealing funds from their annuities via withdrawals and fraudulent loans.

Sampson Pearson is accused of then directing his firm to move the funds into his account, which is the same account into which he was paid commissions. He then used the allegedly stolen money to fund his personal lifestyle and expenses. According to his criminal indictment, he used the names, addresses, Social Security numbers, and electronic IDs of the broker-dealer’s clients to commit broker fraud.

Although Northwestern Mutual Investment Services was the one that notified law enforcement about his questionable activities after a customer pointed out a discrepancy in her records, FINRA found that the broker-dealer failed to have a reasonable supervisory system in place to properly oversee and monitor the transfer of customer monies to third party accounts and external entities.

Because of this, contends the SRO, Northwestern Mutual Investment Services was unable to detect when Pearson moved nearly $474K during 23 transfers to his account. The broker-dealer, in agreeing to pay the $350K fine, settled with FINRA but without denying or admitting to the findings.

Stockbroker Fraud: Misappropriation of Investments and Forgery

Pearson worked 16 years in the securities industry, first as a Jefferson Pilot Securities Corp. broker, then with Robert W. Baird & Co., and finally with Northwestern Mutual Investment Services.

Except for one of the customer disputes listed on his record that was closed due to a lack of action, the rest of the complaints were settled. All of them allege annuity fraud, with several settlements reaching the six figures, including one more than $304K settlement. Misappropriation and forgery were the common allegations running through the disputes.

Other Northwestern Mutual Brokers Accused of Fraud

Ex-broker Sampson Pearson is not the only former Northwestern Mutual Investment Services registered representative recently accused of fraud. Mathew Thomas Cochran was the subject of a $300K customer dispute alleging unsuitable investment recommendations. FINRA barred him in 2018.

Ex-Northwestern Mutual Investment Services broker Manish Shah was fired by the firm last year over allegations that he received customer loans and lied about it. A customer accused him of using false representations to get her to lend him $200K. That claim was settled for almost $146K.

Failure to Supervise Victim? Get Legal Aid From Investment Fraud Attorneys

Broker-dealers have a duty to properly supervise their registered representatives and make sure that not only do they have the appropriate systems and procedures in place, but also that they have the means to execute said supervision so as to protect investors from fraud. Our brokerage firm fraud lawyers have successfully pursued failure to supervise claims against firms whose negligence has resulted in losses to customers.

Contact SSEK Law Firm today if you suffered losses while working with a Northwestern Mutual Investment Services broker or any other stockbroker.