Sandeep Varma Sanctioned by FINRA for Providing Misleading Claims on CRT Stategy

shutterstock_66745735-300x200The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Sandeep Varma (Varma).  According to BrokerCheck records, Varma has been subject to two regulatory matters in which FINRA sanctioned Varma for various violations of the securities laws. In addition, Varma has been subject to five customer complaints. The majority of these complaints involve the recommendation of unsuitable and misrepresented variable investments including CRTs and life insurance policies.

In January 2018, FINRA found that Varma misrepresented a real-estate planning strategy involving Charitable Remainder Trusts (CRTs) to 70 potential customers by providing misleading claims about the nature of deferred capital gains taxes, risks, and rewards that are involved in CRTs. In addition, Varma recommended that the sale of appreciated assets should be invested into variable annuities and into premiums for an insurance policy. While recommending these investments, Varma failed to disclose that the premium payments for the life insurance policy were dependent on performance of investments in the CRT and that this yielded risk for lapse in the insurance policy. FINRA found that Varma’s positive projection of the performance of investments in the CRT and life insurance policy was exaggerated in a promissory manner because it didn’t disclose the reasonable possibility of negative investment performance. In February 2018, Varma was suspended for 10 days and fined $15,000. Without admitting or denying the findings, Varma consented to the sanctions and to the entry of findings.

Varma has also been subject to numerous customer complaints over the course of his career.  The most recent case was filed in August 2017 and alleged that in 2000, Varma recommended an unsuitable life insurance policy investment to customers. The claim was settled at $350,000.

In January 2016 another customer filed a complaint alleging that from 2002 to 2014, Varma recommended an unsuitable insurance life policy to customers. The claim was settled for $850,000.

Variable Universal Life (VUL) insurance policies are complex insurance and investment products. One feature of a VUL policy is that the owner can allocate his payments to a separate sub-account that is typically placed into various investments. The other feature of a VUL is that administrative fees and the insurance charge are deducted from the cash value of the policy each month. The cash value of the policy increases or decreases depending on how well the investments perform. Customers must be careful in purchasing VULs because if the policy terminates or lapses, the remaining cash value won’t be sufficient to pay off the monthly deductions and charges. While an investor may be able to afford the initial purchase price of the policy, it may be too expensive for the client to continue to make premium contributions over time causing the policy to lapse.

Varma has been in the securities industry for 28 years and has been registered with FSC Securities Corporation since 2015. From 1995 to 2015, Varma was registered with LPL Financial LLC.

Investors who have suffered losses may be able recover their losses through securities arbitration. The investment attorneys at Gana Weinstein LLP are experienced in representing investors in cases of brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.