Massachusetts Fines LPL Financial and Roger Zullo $3.7 Million Over Annuity Sales

shutterstock_133831631-198x300Our firm’s investment attorneys are investigating a complaint filed by the Commonwealth of Massachusetts Securities Division (Massachusetts) against LPL Financial LLC (LPL) and the firm’s broker Roger Zullo (Zullo) Zullo alleging that Zullo fabricated the financial suitability profiles of numerous LPL clients, selling them scores of large, illiquid, unsuitable, high-commission variable annuities, at substantial upfront profits to himself and LPL.

The State of Massachusetts alleged that over the course of three years Zullo and LPL received more than $1,825,000 in variable annuity commissions alone and 98% of that amount represented commissions from the sale of the same annuity product – the Polaris Platinum III (B Shares) variable annuity.  The State found that Zullo bypassed LPL’s paper-thin compliance review process for these sales by fabricating client financial suitability information, such as age and liquid net worth.  Further, LPL apparently rewarded Zullo’s fraudulent practices with the honor of being included in LPL’s “Chairman’s Club” for top annuity production.

According to the State LPL was aware that Zullo repeatedly and openly sold only one product, with the same features and the same justifications, to almost every annuity client, and did nothing to stop it.  LPL was also alleged to have been aware that Zullo’s clients repeatedly incurring surrender charges and being charged high commission. According to one email from Zullo’s supervisor “It did very much seem to me that he had a pattern of switching everybody out of their annuities every 6 or 7 years and that he was getting commissions over and over again from the same clients.”  Massachusetts found that any concerns concerning Zullo’s practices were ignored.

Variable annuities and equity indexed annuities are complex financial and insurance products.  In fact, recently the Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know encouraging investors to ask questions about the variable annuity before investing.  Essentially, a variable annuity is a contract with an insurance company under which the insurer agrees to make periodic payments to you.  The investor chooses the investments made in the annuity and value of your variable annuity will vary depending on the performance of the investment options chosen.  The primary benefits of variable annuities are the death benefit and tax deferment of investment gains.

However, the benefits of variable annuities are often outweighed by the terms of the contract that include exorbitant expenses such as surrender charges, mortality and expense charges, management fees, market-related risks, and rider costs.

Zullo entered the securities industry in 1988.  From August 2004 until December 2016, Zullo was associated with LPL out of the firm’s Boston, Massachusetts office location.

Gana LLP’s securities fraud attorneys represent investors who have suffered securities losses due to the mishandling of their accounts due to claims of fraud and negligence.  The majority of these claims may be brought in securities arbitration before FINRA.  Our consultations are free of charge and the firm is only compensated if you recover.