The Financial Industry Regulatory Authority (FINRA) sanctioned broker Allen B. Olander (Olander) of Centaurus Financial, Inc. (Centaurus) concerning allegations that Olander failed to disclose an IRS lien on his Form U4, borrowed money from a customer, and made unsuitable recommendations in the sale and exchange of variable annuities. This is the second Centaurus broker that we have recently reported has been sanctioned.
Olander first became registered as an registered broker in 1993. Olander holds a Series 6 license that allows him to sell only open end mutual funds and variable annuities. From October 2007, to July 2011, Olander was associated with Centaurus. Olander’s BrokerCheck discloses that customers have filed at least 12 complaints against Olander concerning his conduct in handling their accounts. Many of the complaints involve the suitability or failure to disclose certain risks and features of variable annuities.
FINRA found that in May 2011, Olander received a lien by the Internal Revenue Service (IRS) in the amount of $42,465. According to FINRA, Olander failed to amend his Form U4 to disclose the lien. Disclosure of tax liens is important for investors because it lets the public know that the broker has had financial difficulties managing their own affairs and may be tempted to recommend products and services that are overly expensive in order to satisfy debts.
FINRA also found that from September 2010, to March 2011, Olander borrowed a total of $40,000 from an elderly customer. While FINRA found that Olander repaid the loan by July 2011, Centaurus’ policy and procedures for borrowing from customers required prior written approval from the compliance department which Olander did not obtain.
Finally, FINRA alleged that several customers were sold unsuitable variable annuities and variable universal life insurance policies. In one example, FINRA found that in 2010 Olander advised a customer to make gifts to another individual to reduce their taxable estate. Olander recommended the purchase of five variable universal life insurance (VUL) policies with each going to five children designated as the insured on a separate policy. FINRA found Olander’s recommendation unsuitable for two reasons. First, because the customer only paid the initial premiums (instead of the typical 7-year pay), the contracts required additional premiums in order to avoid lapse. However, FINRA alleged that the giftee could not afford to pay those premiums and the contracts faced eventual lapse. Second, FINRA found that Olander’s recommendation were issued as Modified Endowment Contracts (MECs) which had the effect of increasing tax implications. In sum, FINRA concluded that the purchase of the VUL contracts were without a reasonable ground to believe that the recommendations were suitable upon the basis of the facts disclosed and the financial situation
The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning the unsuitable sale of variable annuities and products. Our consultations are free of charge and the firm is only compensated if you recover.