The Financial Industry Regulatory Authority (FINRA) has barred broker Mark R. Talley (Talley) formerly of Fifth Third Securities, Inc. concerning allegations of misrepresenting the properties of a variable annuity product to a customer. Our firm has received complaints concerning variable annuities from a number of clients complaining that their broker failed to explain the risks of these complex products.
A variable annuity is an investment and insurance product with significant risks and features the investor should be aware of before investing. Recently the Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know. The SEC encouraged investors considering a purchase of a variable annuity to “ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether a variable annuity is right for you.”
A variable annuity is a contract with an insurance company where the insurer agrees to make periodic payments to you. The investor chooses investments to be made in the annuity and the value of the variable annuity will vary depending on the performance of the investment options chosen. The investment options for a variable annuity are usually mutual funds.
The three primary benefits of variable annuities are: 1) periodic payments for life; 2) a death benefit where your beneficiary is guaranteed to receive typically at least the amount of your purchase payments; and 3) variable annuities are tax deferred vehicles, meaning that you pay no taxes on the income and investment gains from the annuity until you withdraw your money.
However, these benefits must be weighed against the terms of the contract including surrender charges, mortality and expense charges, management fees; and rider costs. Variable annuities are high sales commission products and sometimes advisors push the product on investors who do not need them or cannot benefit from them. For example, a tax deferred account such as an IRA account would be unsuitable for holding a variable annuity investment because an IRA is already tax deferred.
In Talley’s case, FINRA determined that in July 2011, Talley recommended that his customer replace an existing variable annuity with a new variable annuity. FINRA found that on July 25, 2011, Talley misrepresented to the customer both orally and in writing that his existing variable annuity was out of the surrender period and could be sold without incurring a surrender fee. In fact, FINRA found that the variable annuity was still in the surrender period and the customer would incur a $15,000 surrender fee when the annuity was sold. According to FINRA, the customer relied upon Talley’s representation and sold the annuity to purchase a new one.
On May 21, 2012, Fifth Third filed a Form U5 with FINRA disclosing that Talley was permitted to resign after the firm determined that he had ”provided inaccurate information on a client disclosure document.” Thereafter, FINRA sent Talley an information request letter. After a series of correspondence, Talley failed to participate in FINRA’s investigation and was barred from the industry.
The attorneys at Gana Weinstein LLP are experienced in representing investors concerning variable annuities. Our consultations are free of charge and the firm is only compensated if you recover.