Variable Annuities

Published on: January 28, 2014

Variable Annuities Unsuitable for Many Investors, Especially Retirees

Securities fraud attorneys are currently investigating claims on behalf of investors — especially older, retired investors — who suffered significant losses because of the unsuitable recommendation of variable annuities. Variable annuities are a type of insurance product. With this product, the investor pays into an account now in exchange for the guarantee of a future payout. The investment is tied to a stock index return, making it variable.

Variable Annuities Unsuitable for Many Investors, Especially Retirees

According to stock fraud lawyers, variable annuities typically offer large sales commissions to brokers and, as a result, some brokers make unsuitable recommendations. Furthermore, tax deferrals associated with variable annuities make them particularly unsuitable for retirees if the retirees’ assets are already held in an account that provides tax deferral (such as an IRA). Reportedly, an arbitration panel recently awarded $112,000 to one investor who was sold variable annuities which then were put into the investor’s tax-deferred IRA account. This strategy negates or renders irrelevant any tax benefit that would have been provided by the variable annuity.

InvestmentNews recently reported that individuals who invest in variable annuities are facing a risk of forced annuitizations. If so, the annuitizations will eliminate some death benefits, which are a primary reason many investors have chosen to invest in variable annuities. A report by the Wall Street Journal states that while variable annuity claims lagged in 2013 after surging in 2012, the 2013 claims were still higher than the number of mutual fund and stock lawsuits.

Published on: September 12, 2013

Investigations into Unsuitable Sales of REITs, Variable Annuities by Royal Alliance Securities, LPL Financial Representatives

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of individuals who suffered significant losses as a result of the unsuitable recommendation of non-traded REITs and variable annuities from Royal Alliance Securities- and LPL Financial-registered representatives.

Investigations into Unsuitable Sales of REITs, Variable Annuities by Royal Alliance Securities, LPL Financial Representatives

Reportedly, a claim has already been filed on behalf of one investor against Kathleen Tarr, a former representative of Royal Alliance Securities. Allegedly, Tarr recommended taking an early retirement option and then sold the investor unsuitable variable annuities and non-traded REITs. Prior to taking the early retirement option, the investor’s portfolio consisted of diversified retirement investments.

In addition, securities arbitration lawyers are investigating recommendations made by Brian Brunhaver, a former registered representative for LPL Financial. Allegedly, Brunhaver unsuitably recommended the purchase of the non-traded REITs, specifically Inland American and Inland Western, to a client. This client was seeking to make investments that would fund future college expenses. Because of the illiquidity of non-traded REITs, the investments could not be sold in time to meet the client’s needs.

Published on: January 31, 2013

Bambi Holzer Still Trading Despite Numerous Customer Complaints

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Bambi Holzer. According to a Forbes article, Holzer’s investment advice has resulted in securities settlements amounting to more than $12 million. Despite this article, which appeared three years ago, her trades are still being cleared by brokerage firms.

Bambi Holzer Still Trading Despite Numerous Customer Complaints

Currently a broker at Newport Coast Securities, Holzer has also worked with a number of other firms, including UBS, Brookstreet Securities Corporation, AG Edwards, Wedbush Morgan Securities Inc. and Sequoia Equities Securities. Holzer and UBS have already been compelled to pay to settle securities claims amounting to $11.4 million. These claims alleged that Holzer misrepresented variable annuities through misrepresentation of guaranteed returns. Holzer was fired from AG Edwards in 2003 for allegedly engaging in business practices that did not coincide with the firm’s policies. Further allegations against Holzer include misrepresentations while at Brookstreet. These misrepresentations allegedly occurred in 2005 at a Beverly Hills presentation at which Holzer allegedly stated that a fictional couple was able to make $9 million by deferring $732,000 in taxes through the use of trusts. In another claim, a customer of Wedbush Morgan Securities alleged breach of fiduciary duty, account mishandling, and breach of contract that allegedly resulted in damages of $824,000.

According to securities fraud attorneys, allegations against Holzer include fraud, churning, unsuitable investments, misrepresentations of fees, Securities Act violations, private placement-related fraud, negligent representations related to variable annuities, inadequate supervision, variable annuity-related fraud, negligent recommendation and sale of Provident Royalties LLC, negligent sale and recommendation of Behringer Harvard Security trust and other unsafe products as well as elder abuse.

Published on: April 18, 2012

Investors Who Sustained Losses as a Result of Retail Property of America Inc. REIT May Have Claim

by InvestorLawyers

According to securities arbitration lawyers, investors who sustained losses as a result of Retail Properties of America Inc. Real Estate Investment Trust (REIT) may be able to recover losses through Financial Industry Regulatory Authority (FINRA) arbitration. Formerly known as Inland Western REIT, Retail Properties of America is the third-largest shopping center REIT in the nation. The investment’s recent IPO offering had some disastrous results for investors.

Investors Who Sustained Losses as a Result of Retail Property of America, Inc. REIT May Have Claim

Recent reports show that the $8 offering price of Retail Properties came only as a result of reverse-stock-split engineering. Furthermore, this price is significantly less than the $10 to $12 expected pre-offering price. Investors who originally paid $10 per share for the REIT are actually receiving a split-adjusted value of $3 per share. Investment fraud lawyers say this 70 percent decline may result in significant losses that could be recovered through securities arbitration.

Retail Properties is a non-traded REIT. According to investment fraud lawyers, REITs typically carry a high commission, which motivates some brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs like this one carry a relatively high dividend or high interest, which also helps make them attractive to investors. However, they are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is. For more information on REITs, see the previous blog post, “FINRA Investor Alert: Public Non-Traded REITs.”

Published on: April 6, 2012

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) recently fined one of the United States’ largest independent broker-dealers, Cadaret Grant. Grant must pay a $200,000 fine in addition to restitution to investors because of improper sales practices of variable annuities to elderly investors. According to investment fraud lawyers, improper sales of variable annuities are a common cause for securities arbitration claims.

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

According to investment fraud lawyers, variable annuities are popular investment vehicles for retirement. Essentially, they are insurance contracts that are joined with an investment product. They have insurance-like properties but function as tax-deferred savings vehicles by providing a tax deferral using the insurance policy. The combination of the investment product and insurance contract provides four appealing features: a tax deferral on earnings, the ability to name a beneficiary for the account, the ability to use your life expectancy to receive payments for life and the ability to receive guarantees based on the insurance component. However, variable annuities are also a common vehicle for investment fraud, according to securities arbitration lawyers.

One of the registered representatives for Cadaret Grant sold 13 elderly clients unsuitable death benefit riders to variable annuities from 2006-2008, according to FINRA’s decision announcement. All 13 of the clients were age 77 or older. Apparently, the death benefit was only effective through age 80. Furthermore, despite the fact the death benefit did not apply beyond age 81, it cost the clients 25 additional basis points in fees for the duration of the policy. Apparently, four of the clients could not benefit from the rider in any way.

Published on: February 9, 2012

Watch List Issued by FINRA

by InvestorLawyers

On January 31, 2012, the Financial Industry Regulatory Authority (FINRA) posted a letter on its website outlining its 2012 priorities for regulation and examination. According to the letter, “FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud.” The letter goes on to state FINRA’s concerns that investors “may be inadvertently taking risks they do not understand or that are inadequately disclosed.”

This is a concern that is shared by investment attorneys as they are faced with client after client that have suffered significant losses as a result of insufficient disclosure or lack of understanding.

Top products on FINRA’s watch list for suitability problems include non-traded real estate investment trusts (REITs), residential and commercial mortgage-backed securities, municipal securities, variable annuities, structured products, exchange-traded funds using synthetic derivatives and significant leverage, life settlements and private placements.

Published on: February 1, 2012

Have You Been the Victim of Stock Broker Fraud?

by InvestorLawyers

While investors are told time and time again to inspect monthly statements from the broker or firm handling their investments, many are still victims of fraud that could have been detected before losses become so substantial that the victim may never recover. Careful evaluation of monthly statements and transaction documents can uncover discrepancies that indicate stock broker fraud has occurred.

Have You Been the Victim of Stock Broker Fraud? Check your Monthly Statements for Discrepancies, Irregularities, and Unauthorized Transactions

Ralph Edward Thomas Jr., Vice President of Harbor Financial from August 2000 through February 2004 and a financial advisor for Wells Fargo Advisors LLC from February 2004 through July 2010, is allegedly the perpetrator of a particularly heinous fraud. Thomas controlled a trust of $3 million that had been granted as a result of birth injuries that resulted in cerebral palsy for a child. According to allegations against Thomas, he stole more than $756,900 from the trust through cashier’s checks and unauthorized withdrawals and used the money to pay personal expenses and personal credit card accounts. How did he do it? The settlement funds were used to purchase an annuity which would pay the child at least $3,990 per month. In reality, the monthly payment actually averaged around $6,287 per month. However, when Thomas should have dispersed this monthly sum to the mother for care of the child, he only dispersed $1,000 to $1,500 a month. In addition, Thomas allegedly used forgery to initiate three mortgages in the name of the fund’s trustee. Proceeds from the mortgages were deposited into the account and then withdrawn by Thomas for personal use. In this way, Thomas obtained an additional $205,000.

Stock broker fraud lawyers strongly urge investors to keep a close eye on their monthly statements and any other documentation received from entities controlling their investments. Investors that have not, up to this point, been diligent in monitoring their statements should go back and review statements immediately. If any discrepancies, irregularities or unauthorized transactions are found that may indicate stock broker fraud has occurred, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Published on: January 2, 2012

A Notice to the Clients of William Tatro

by InvestorLawyers

Investment attorneys are interested in speaking with clients of William Tatro in connection with investment losses they suffered under his advisement. Complaints have been registered against Tatro stating that he recommended to his clients unsuitable, illiquid, high commission investments. These investments had a higher degree of risk than many clients would have accepted, and in some cases resulted in massive losses. Many clients lost a significant amount of their life savings. These recommendations were in violation of Financial Industry Regulatory Authority regulations which state that recommendations must be suitable for the client and in keeping with their investment goals. A broker may not, for example, recommend very risky investments to an individual who can’t afford to sustain the losses, such as a retiree.

A Notice to the Clients of William Tatro

Another type of investment that is usually unsuitable for retirement accounts are annuities investments. Annuities restrict the availability of funds and are high commission investments. Complaints against Tatro allege that he repeatedly sold leveraged inverse Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) to clients for whom the investments were unsuitable. REITs are high-commission variable annuities. FINRA issued a warning which stated that leveraged inverse ETFs are unsuitable for ordinary investors and that these investments should be held for a short time period only. Despite FINRA’s warning, Tatro allegedly recommended these investments and held the investments long-term. Many investors have stated that this was the case for their accounts and that they sustained substantial losses as a result.

In the claim of Mid-Lakes Management Corp. vs. Eagle Steward Wealth Management LLC, one arbitrator stated that, “There was no evidence that Mr. Tatro properly investigated leveraged inverse funds. In fact, it is highly unlikely that Mr. Tatro could have done so, for such research would have demonstrated that holding leveraged inverse funds for a lengthy period of time dramatically increased risk of the claimant.” In resolving the claim, $530,449 in damages was awarded to the claimant.

Published on: December 26, 2011

Variable Annuities and Variable Annuity Fraud

by InvestorLawyers

Investment attorneys are seeking investors who purchased variable annuities based on recommendations that were unsuitable and/or contradicted their investment goals. Because of the complicated nature of variable annuity contracts, many investors are uncertain of the risks or negative aspects associated with them.

Variable Annuities and Variable Annuity Fraud

What are Variable Annuities?

Variable annuities are popular investment vehicles for retirement; essentially, they are insurance contracts that are joined with an investment product. They have insurance-like properties but function as tax-deferred savings vehicles by providing a tax deferral using the insurance policy. The combination of the investment product and insurance contract provides four appealing features: a tax deferral on earnings, the ability to name a beneficiary for the account, the ability to use your life expectancy to receive payments for life and the ability to receive guarantees based on the insurance component.