FINRA Sanctions Broker John Steffen Over Variable Annuity Practices

shutterstock_130706948The securities lawyers of Gana Weinstein LLP are investigating the regulatory complaint filed by The Financial Industry Regulatory Authority (FINRA) against broker John Steffen (Steffen).  The FINRA regulatory action (No. 2012035116901) alleges that Steffen, from December 14, 2010 through December 15, 2011, executed approximately 1176 discretionary transactions by making reallocations in the subaccounts of variable annuities owned by approximately 192 customers, without obtaining written authorization from the customers.

In addition, Steffen has 13 disclosed customer complaints and one employment termination for cause.  In June 2016 a customer filed a complaint against Steffen alleging unsuitability, breach of fiduciary duty, and churning in connection with a series of variable annuity transactions conducted over a period of 12 years. The complaint also alleged that Steffen was not properly supervised.  The complaint alleges damages of $285,000 and is currently pending.

Variable 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.

Steffen entered the securities industry in 1985.  From 2002 through November 2010, Steffen was registered with CFD Investment, Inc. Thereafter, from November 2010 until May 2016, Steffen was registered with Silver Oak Securities, Incorporated out of the firm’s Florence, Kentucky office location.

The number of events listed on Steffen brokercheck is high relative to his peers.  According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records.  Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints.  In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters.  However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck.  More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

The investment fraud attorneys at Gana Weinstein LLP represent investors who have suffered securities losses due to the mishandling of their accounts.  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.