Articles Tagged with equity-indexed annuities

shutterstock_70999552Our firm’s investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Joseph Zastrow (Zastrow) currently associated with Thrivent Investment Management Inc. (Thrivent) alleging unsuitable recommendations to invest in variable products such as variable annuities, equity indexed annuities, and variable life insurance.  According to brokercheck records Zastrow has been subject to six customer complaints and one criminal matter.

In August 2016 a customer alleged that Zastrow failed to provide the customer with disclosures about the variable annuity contract or provide suitability information in July 2015.  The customer also alleged that his signature was forged on documents dated May 2015. The customer claimed $2,956.67 in damages and was granted $2,861.98.

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.

shutterstock_102757574Our firm’s investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Alan Thomilson (Thomilson) currently associated with Lincoln Financial Securities Corporation (Lincoln Financial) alleging unsuitable recommendations to invest in variable products such as variable annuities, equity indexed annuities, and variable life insurance.  According to brokercheck records Thomilson has been subject to six customer complaints and one criminal matter.

In March 2015 a customer alleged that Thomilson misrepresented a recommendation to replace an existing variable annuity with an equity indexed annuity and that the recommendation was not suitable causing $125,000 in damages.  The claim is currently pending.

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.

shutterstock_89758564The investment attorneys of Gana Weinstein LLP are interested in speaking with clients of Detlef Schoeppler (Schoeppler). According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) Schoeppler has been the subject of at least 10 customer complaints, one criminal matter, and three judgments or liens. The customer complaints against Schoeppler allege securities law violations that claim unsuitable investments in various investment products including REITs, variable annuities, and mutual funds. The most recent complaint was filed in August 2012, and alleged $77,569 in damages due to claims that the broker recommended a variable annuity purchase in June 2011 that was misrepresented to the customer. In addition, the customer alleged that the fees were not fully disclosed and that there were trades made without the client’s authorization.

In addition, in July 2014, two tax liens were imposed on Schoeppler. One lien is for $184,519 and the other is for $182,691. A broker with large liens are an important consideration for investors to consider when dealing with a financial advisor. An advisor may be conflicted to offer high commission investments to customers in order to satisfy liens and debts that may not be in the client’s best interests.

Schoeppler entered the securities industry in 1996. Since June 1996, Schoeppler has been associated with Ameriprise Financial Services, Inc. out of the firm’s Tampa, Florida branch office location.

shutterstock_189135755As long time readers of our blog know, this is not the first time we have alerted investors to the potential pitfalls to investing in equity indexed annuities. Recently, the Wall Street Journal ran an article concerning a probe being conducted by Sen. Elizabeth Warren (D., Mass.) regarding sales incentives for annuities products issued by insurance companies. The senator’s investigation comes on the heels of a speech given by Luis Aguilar, Commissioner to the Securities and Exchange Commission (SEC), before the North American Securities Administrators Association (“NASAA”), stating that the SEC is looking closely at sales practices with respect complex securities including equity-indexed annuities, leveraged and inverse-leveraged exchange traded funds, reverse convertibles, alternative mutual funds, exchange traded products, and structured notes.

According to news sources, the senator’s focus is on indexed annuities which have become widely known within the industry for granting perks to agents. Sen. Warren is said to have quoted from some of the marketing materials aimed at insurance agents describing sales incentives including “four days in the heart of California’s wine country at the prestigious Calistoga Ranch and Spa”; a trip to South Africa to visit Cape Town and Kruger National Park; and the ability to win “tour the Mediterranean on a private yacht, like royalty, celebrities, and the wealthy elite.” According to the report, Sen. Warren is concerned that earning perks may provide a greater incentive for making recommendations that acting in their clients’ best interest.

Equity indexed-annuities promise a return tied to a stock-market index while protecting against losses if the market falls. Sounds good right. Except there are serious limitations built into the products which make them both very expensive and limited to almost CD like returns. Accordingly, if the market has a blockbuster year, your equity-linked annuity will not perform in kind.

shutterstock_187532306The Financial Industry Regulatory Authority (FINRA) ordered RBC Capital Markets (RBC) to pay a $1 million fine and approximately $434,000 in restitution to customers for alleged supervisory failures resulting in sales of unsuitable reverse convertibles.

As a background, a reverse convertible is an interest-bearing note where repayment of the principal is tied to the performance of an underlying asset, such as a stock or basket of stocks. Investor risk of loss comes from changes in the value of the underlying asset. If the asset falls below a certain level at maturity or during the term of the reverse convertible the investor can suffer losses. In February 2010, FINRA issued a regulatory notice on reverse convertibles emphasizing the need for firms to perform a suitability analysis in connection with sales of reverse convertible because they are complex product.

FINRA and the SEC have both expressed alarm at the growing popularity of complex products. Complex securities include, but are not limited to equity-indexed annuities, leveraged and inverse-leveraged exchange traded funds, reverse convertibles, alternative mutual funds, exchange traded products, and structured notes. A 2012 SEC study on investor financial literacy found that retail investors, and particularly the elderly and minorities, lack basic financial literacy skills. Combining a general lack of financial literacy with an investment product landscape that increasingly focuses on ever more complex product offerings and investors are more reliant on their advisers than ever. Accordingly, retail investors do not always fully appreciate the risks involved with these.

shutterstock_26269225On April 14, 2015, Luis Aguilar, Commissioner to the Securities and Exchange Commission (“SEC”), gave a speech before the North American Securities Administrators Association (“NASAA”), stating that the SEC is looking closely at sales practices with respect complex securities. “Complex securities” refers to securities that include complex features such as imbedded derivatives. Complex securities include, but are not limited to equity-indexed annuities, leveraged and inverse-leveraged exchange traded funds, reverse convertibles, alternative mutual funds, exchange traded products, and structured notes.

The speech cited a 2012 SEC study on investor financial literacy that found that retail investors, and particularly the elderly and minorities, lack basic financial literacy skills. When you combine a general lack of financial literacy with an investment product landscape that increasingly focuses on increasing the complexity of product offerings investors are more reliant on their advisers than ever.

Accordingly these investment products can be very opaque and complex for retail investors to fully appreciate the risks involved. It was also noted that in this environment yield-starved investors become easy prey for fraudulent schemes in complex securities.

shutterstock_173809013This post continues our prior report on the Financial Industry Regulatory Authority’s (FINRA) recently sanctions against Sigma Financial Corporation (Sigma Financial) alleging from April 25, 2011, through June 24, 2012, supervisory deficiencies existed at Sigma including the firm’s supervision of registered representatives, the firm’s suitability processes and procedures, some of the firm’s implemented procedures relating to customer information, and also branch office registration for trade execution.

FINRA found that Sigma Financial permitted its representatives to create and use consolidated statements with their customers that reflected the customers’ holdings of investments away from the firm. However, FINRA found that Sigma Financial did not adequately supervise its representatives’ creation and use of such statements in that the firm neither centrally tracked the number or identity of representatives who were using consolidated statements nor the customers who received such statements. Instead, FINRA found that Sigma Financial relied upon the representatives themselves to submit only the initial template of the consolidated statements they created and intended to use with their customers and the firm did not actually receive or review the statements shared with the customers.

Another supervisory deficiency noted by FINRA was that Sigma Financial had four preferred vendors through which brokers could establish and maintain websites. But use of these vendors, was not required and FINRA found that 134 representatives maintained non-preferred vendor websites, or approximately 20% of all websites. FINRA found that non- preferred vendors failed to notify Sigma Financial if registered representatives made any changes to their websites. In this way FINRA found that Sigma Financial did not conduct adequate supervision of those non-preferred vendor websites.

shutterstock_103681238The law offices of Gana Weinstein LLP recently filed a securities arbitration case on behalf of a family of four investors against First Allied Securities, Inc. (First Allied) and Centaurus Financial, Inc. (Centaurus) concerning allegations that their financial advisor Seyed Ahmad Hashemian (Hashemian) made unsuitable and inappropriate investment recommendations to claimants’ by recommending a near 100% concentration in illiquid, speculative, and high commission investments including variable annuities, equity-indexed annuities (EIAs), private placements, oil and gas ventures, non-traded real estate investment trusts (REITs), and Advanced Equities private placements.

Our law offices have represented over a dozen investors who alleged that they were sold the Advanced Equities private placements through the use of false and misleading advertising materials. In addition, to customer complaints both FINRA and the SEC have sanctioned Advanced Equities concerning the misleading nature of their sales practices. Customers have alleged that the products were misrepresented as “late stage equities” that were a mere 12-36 months from going public. The complaint also alleged that the investments were sold as providing “Higher near-term investment returns than the public equity markets” while providing “Greater short-term liquidity and lower risk profiles.” The complaint alleged that these representations were false and that First Allied failed to conduct even basic due diligence to verify the accuracy of these statements.

In the case of the recent complaint filed, claimants’ investments were alleged to have been made using money that was supposed to be used to replace the earnings the untimely passing of a family member. As a result, the complaint alleged that over a nearly nine year period where the broader market indexes have hit all-time highs, claimants have lost significant sums their investments. The claimants alleged that they have been deprived of the ability to generate reasonable returns by being trapped in illiquid and unsuitable investments.