Articles Posted in Reg BI

According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Robert Hillard (Hillard), currently associated with Arlington Securities, Inc., has at least one disclosable event. These events include one regulatory, alleging that Hillard recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.

FINRA BrokerCheck shows a final customer complaint on December 11, 2024.

Without admitting or denying the findings, the firm and Hillard consented to the sanctions and to the entry of findings that Hillard recommended that 14 customers liquidate their lower-cost Class A and Class C mutual funds to purchase higher-cost variable annuities without having a reasonable basis to believe the transactions were suitable. The findings stated that when some of the Class C share mutual funds that Hillard had previously sold to his customers began to convert to Class A shares, these conversions resulted in a substantial decrease in Hillard’s personal income. Hillard expected other Class C shares would also convert to Class A shares, further reducing Hillard’s ongoing trail commissions. The investment-only variable annuity, unlike the customers’ mutual fund holdings, charged additional fees, resulting in an increase in the customers’ annual expense. Hillard provided substantially identical written rationales for all of these recommendations without consideration of the differences in the individual profiles of each customer. As a result of Hillard’s unsuitable recommendations, his customers collectively paid an additional $67,026.47 in annual fees. The findings also stated that the firm’s supervisory system, including its WSPs, were not reasonably designed to achieve compliance with FINRA’s suitability requirements regarding recommendations to sell mutual funds or purchase variable annuities. The firm’s WSPs failed to describe the steps that supervisors must take to review the suitability of these transactions, including the identification of potential red flags that the recommendation is not consistent with the customer’s investment profile. The firm also failed to analyze whether there was any benefit to purchasing an investment-only variable annuity in a qualified account, or whether the customers’ objective of making fund transfers easier could be accomplished through cost-free exchanges within the same mutual fund family. Finally, the firm failed to reasonably review the suitability of Hillard’s recommendations that his customers liquidate their mutual funds in order to purchase higher-cost variable annuities. The firm failed to consider that the customer’s ongoing fees on their existing mutual funds had or would decrease by converting to Class A shares, which would further increase the differential in fees with the investment-only variable annuity.