Infinex Investments (“Infinex”, CRD No. 35371) of Meriden, Connecticut has entered into a Consent Order with Massachusetts securities regulators, agreeing to pay a fine of $125,000 and make restition to investors to resolve allegations that it failed to adequately supervise agents who were selling high-commission securities products. Infinex registered representatives allegedly targeted customers at bank branches, primarily senior citizens, for unsuitable investment recommendations, including real estate investment trusts REITs and variable annuities, primarily to senior customers at local banks who didn’t understand the products.

Infinex is majority-owned by a group of nearly 40 banks that offer securities on bank premises and has selling agreements with approximately 30 banks in Massachusetts. Infinex also operates in other states and, according to the Financial Industry Regulatory Authority (“FINRA”), is licensed to operate in 53 U.S. states and territories. Therefore, it is possible that sales of investments such as those that allegedly occurred in Massachusetts may have occurred in bank branches in other states.

The Massachusetts Securities Division reportedly began investigating sales practices by Infinex after senior citizens complained that they had been sold investments they did not ask for or did not understand. The Consent Order is accessible below.

Executed-Infinex-Consent-Order-E-2017-0092

Brokerage firms like Infinex and their representatives must have a reasonable basis for any investment recommendations that they make to customers- a requirement known as “suitability”. FINRA’s suitability rule, Rule 2111, requires that before making a recommendation, broker-dealers must take into account a customer’s age, risk tolerance, time horizon, liquidity needs, other investments and experience, as well as any applicable tax considerations.

FINRA has provided the following guidance with respect to the terms “risk tolerance,” “time horizon” and “liquidity needs”:

• Risk Tolerance: “A customer’s ability and willingness to lose some or all of [the] original investment in exchange for greater potential returns.”
• Time Horizon: “The expected number of months, years, or decades [a customer plans to invest] to achieve a particular financial goal.”
• Liquidity Needs: “The extent to which a customer desires the ability or has financial obligations that dictate the need to quickly and easily convert to cash all or a portion of an investment or investments without experiencing significant loss in value from, for example, the lack of a ready market, or incurring significant cost or penalties.”

Attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes concerning unsuitable investment recommendations by stockbrokers or investment advisors. Investors may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

As part of its ongoing regulatory focus on variable annuity (“VA”) sales misconduct, the Financial Industry Regulatory Authority (“FINRA”) has recently barred a former Next Financial Group (“Next Financial”) (CRD# 46214) broker. Registered representative JoeAnn Walker (CRD# 2210194) was previously affiliated with Commonwealth Financial Network (1998-2006), LPL Financial LLC (2006-2015), and most recently, NEXT Financial – until her termination by her former employer in October. According to FINRA, it was conducting an inquiry into whether Ms. Walker was engaging in possible unsuitable VA sales practices.

As we have discussed in several recent blog posts, FINRA has ramped up its efforts in recent months to target VA sales practice misconduct. Since handing down a $20 million fine against MetLife Securities, Inc. (“MSI”) in May, 2016 (in addition, FINRA ordered MSI to pay $5 million to customers in connection with allegations of making negligent material misrepresentations and omissions on VA replacement applications), FINRA enforcement has continued to fine numerous member firms and investigate certain financial advisors concerning variable annuity sales practice issues.

In particular, FINRA has targeted brokers recommending unsuitable VAs, in the first instance, as well as recommending the sale of one VA for another in order to generate commissions (a practice akin to churning, and commonly referred to as “switching”). According to publicly available information through FINRA, Ms. Walker has three prior customer complaints, each of which resulted in a settlement. Most recently, in March 2016, a customer initiated a dispute against Ms. Walker, alleging “… unauthorized sales of various stocks, unauthorized and unsuitable purchases of variable annuities and unauthorized mutual fund switches between June 2014 and June 2015.” That FINRA proceeding alleged damages of $208,764 and ultimately settled for $175,000.

VAs are very complex financial products that typically charge significant commissions and fees. When a financial advisor sells a VA, they will usually receive a sizeable commission, ranging anywhere from 3-7%. Additionally, the VA contract carries various fees, such as a mortality expense (in connection with the contract’s death benefit), investment expenses associated with the sub-accounts holding securities, and administrative expenses on the hybrid security / insurance product.

Before recommending an investment product, applicable rules and regulations mandate that a financial advisor must first conduct a suitability analysis in order to determine whether the product best meets the investor’s stated objectives and profile. Moreover, under applicable industry rules and regulations, brokerage firms like NEXT Financial and Commonwealth Financial are charged with supervising their registered representatives.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors who have suffered losses due to a range of misconduct, including cases involving variable annuities. Investors may be able to recover their losses in FINRA arbitration. Investors may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As part of its ongoing enforcement focus on variable annuity (“VA”) sales practices, the Financial Industry Regulatory Authority (“FINRA”) recently censured and fined Hornor, Townsend & Kent, Inc. (“HTK”) $275,000 for its alleged failure to supervise its brokers’ sales of VAs. HTK (CRD# 4031), headquartered in Horsham, PA, is a full-service broker-dealer that offers a range of investment, including VAs.

In recent months, FINRA has ramped up its enforcement focus on VA sales practices. Ever since handing down a $20 million fine against MetLife Securities, Inc. (“MSI”) in May, 2016 (in addition, FINRA ordered MSI to pay $5 million to customers in connection with allegations of making negligent material misrepresentations and omissions on VA replacement applications), FINRA enforcement has continued to fine numerous member firms concerning VAs sales practice issues. In particular, FINRA has targeted brokers recommending unsuitable VAs, in the first instance, as well as recommending the sale of one VA for another in order to generate commissions (a practice akin to churning, and commonly referred to as “switching”).

FINRA’s recent censure and fine against HTK involves sales of L-share VAs, which were allegedly made without proper supervision. FINRA determined that the activities in question took place between April 2013 and June 2015; during this time frame, it was determined that 7,398 or nearly 47% of the 15,815 VA contracts sold by HTK registered representatives were L-share contracts.

VAs are very complex financial products that typically charge significant commissions and fees. When a financial advisor sells a VA, they will usually receive a sizeable commission, ranging anywhere from 3-7%. Additionally, the VA contract carries various fees, such as a mortality expense (in connection with the contract’s death benefit), investment expenses associated with the sub-accounts holding securities, and administrative expenses on the hybrid security / insurance product. Of significance, L-share contracts usually carry even higher commissions and fees than standard VAs, due to the fact that L-share contracts have shorter surrender periods (only after expiration of a surrender period may an investor exit their VA investment without incurring a surrender charge).

Because L-share VA contracts typically carry higher commissions and fees, there is a very real concern with some financial advisors choosing to sell L-share contracts in order to earn enhanced commissions and fees. Before recommending an investment product, applicable rules and regulations mandate that a financial advisor must first conduct a suitability analysis in order to determine whether the product best meets the investor’s stated objectives and profile. Moreover, under applicable industry rules and regulations, brokerage firms like HTK are charged with supervising their registered representatives. FINRA’s recent $275,000 fine against HTK demonstrates that sellers of L-share VA contracts can expect significant regulatory scrutiny going forward..

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors who have suffered losses due to unsuitable investment recommendations by stockbrokers and financial advisors, including cases involving variable annuities. Investors who wish to discuss a possible claim may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As part of its continued variable annuity (“VA”) abuse crackdown, the Financial Industry Regulatory Authority (“FINRA”) recently censured and fined member firm Ameritas Investment Corp. (CRD# 14869) (“Ameritas”) $180,000 for alleged lapses in the supervision of VA sales by its financial advisors. In a letter of acceptance, waiver and consent (“AWC”), FINRA has disclosed that between September 2013 and July 2015, Ameritas sold 4,075 individual VA contracts. Of these sales, Ameritas sold nearly 700 L-share contracts, totaling about 17% of its overall VA sales, or about $11 million in aggregate VA L-share sales.

FINRA has prioritized VA sales practice misconduct as warranting enhanced regulatory oversight. Recent enforcement efforts by FINRA with regard to VAs has resulted in numerous fines levied in 2016 concerning allegations of sales abuse by brokers recommending unsuitable VAs and/or recommending the sale of one VA for another in order to generate commissions (a practice akin to churning, and commonly referred to as “switching”).

VAs are very complex financial products that typically charge significant commissions and fees. When a financial advisor sells a VA, they will usually receive a sizeable commission, ranging anywhere from 3-7%. Additionally, a VA contract typically carries various fees, such as a mortality expense (in connection with the contract’s death benefit), investment expenses associated with the sub-accounts holding securities, and administrative expenses on the hybrid security / insurance product. Of significance, L-share contracts usually carry even higher commissions and fees than standard VAs, due to the fact that L-share contracts have shorter surrender periods (after expiration of a surrender period, an investor in a VA can exit their investment without incurring a surrender charge).

Because L-share VA contracts typically carry higher commissions and fees, there is a very real temptation for a financial advisor to sell his or her client an L-share VA, without first conducting a suitability analysis to determine that the product best meets the investor’s stated objectives and profile. Moreover, under applicable industry rules and regulations, brokerage firms like Ameritas must seek to ensure that their registered representatives are properly trained and supervised when it comes to selling financial products, particularly complex products like VAs.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors who have suffered losses due to a range of misconduct, including the unsuitable recommendation by a broker to purchase and/or switch from one variable annuity to another VA. Investors may be able to recover their losses in FINRA arbitration. Investors who wish to discuss a possible claim may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As a general rule, annuities are treated as insurance products. Accordingly, annuities are subject to regulation at the State level. Specifically, each State maintains a guarantee fund that will act as a backstop to annuity policies, up to a certain dollar amount, in the event that an insurance carrier experiences insolvency or similar inability to honor its financial obligations. Additionally, each State has its own insurance commissioner, an individual responsible for overseeing all annuity business within that State. Fixed annuities, fixed indexed annuities, single premium immediate annuities, and longevity annuities (a/k/a deferred income annuities) are all regulated at the State level.

VAs are also monitored at the State level. However, because VAs are considered a hybrid insurance / security product, they receive additional scrutiny and regulatory oversight at the federal level. As investment products, VAs are subject to monitoring by both the Securities and Exchange Commission (“SEC”), as well as the Financial Industry Regulatory Authority (“FINRA”).

Recent regulatory enforcement in connection with VAs suggests that identifying VA misconduct for regulatory enforcement is a top priority for FINRA. For example, numerous fines were levied in 2016 by FINRA concerning allegations of sales abuse by brokers recommending unsuitable VAs and/or recommending the sale of one VA for another in order to generate commissions (a practice akin to churning, and referred to commonly in the securities industry as ‘switching’).

Two recent enforcement actions by FINRA highlight the continued need for enhanced regulatory oversight and robust enforcement as concerns unscrupulous brokers engaging in VA switching for their own benefit and at the investor’s expense. In one such recent enforcement action, broker Cecil E. Nivens was suspended from the securities industry for two years and was ordered to disgorge nearly $186,000 in commissions for causing “considerable monetary harm” to customers related to VA exchanges, as based upon a FINRA filing made September 18, 2017. With respect to another VA enforcement proceeding, filed October 6, 2017, FINRA suspended broker Walter Marino for one year in connection with abusive VA switching.

In a typical scenario, a broker recommending that a client sell out of one VA for purchase of another, will advise the client to exchange the annuities under Section 1035 of the tax code. The reason for this is so the transfer can be effectuated on a tax-free basis; it should be noted, however, that such a 1035 exchange will also result in additional commissions for the broker. Therefore, it should come as no surprise that there exists a correlation between sales practice abuse through VA switching and a corresponding recommendation to enter a 1035 exchange. With respect to these recent enforcement proceedings, however, FINRA noted that neither broker categorized the VA switches as 1035 exchanges – arguably in order to conceal any sales practice abuse.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors who have suffered losses due to a range of misconduct, including the unsuitable recommendation by a broker to purchase and/or switch from one VA to another VA. Investors may be able to recover their losses in FINRA arbitration. Investors who wish to discuss a possible claim may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

In the first disciplinary proceeding, FINRA reportedly suspended broker Cecil E. Nivens for two years and ordered the broker disgorge nearly $186,000 in commissions for causing “considerable monetary harm” to customers related to VA exchanges. According to FINRA filings, while working for New York Life, Mr. Nivens allegedly made unsuitable recommendations that several of his clients purchase variable universal life insurance policies, also known as VULs, using use the proceeds of annuities that they already owned. According to the allegations, Mr. Nivens also failed to follow certain technical requirements of Section 1035 of the Internal Revenue Code (IRC) that allows people to transfer funds from one life insurance policy or annuity to a new policy without incurring a tax penalty, resulting in substantial negative tax implications for his customers.

In the second disciplinary proceeding, filed Oct. 6, FINRA charged former Legend Equities broker Walter Joseph Marino with recommending unsuitable variable annuity replacements that benefitted him to the tune of $60,000 in commissions while his customers—including a 78-year-old retired widow—suffered financial harm, including incurring surrender charges and tax liabilities, due to the unsuitable recommendations. The FINRA complaint alleges that Marino recommended that two customers replace their non-qualified variable annuities (VAs) issued by Jackson National Life and The Variable Annuity Life Insurance Company, resulting in unnecessary surrender charges and commissions. FINRA alleges that Marino also failed to utilize a 1035 exchange that would have saved his clients substantial taxes, and pocketed $60,000 in commissions while causing substantial financial harm to his customers.

Brokers typically recommend clients replace annuities under Section 1035 of the tax code. Switching VAs in this manner provides a tax-free transfer for the client, but also generates additional commission for the broker. As such, 1035 exchanges are typically how abusive account churning occurs with annuity products and are a “red flag” that a broker or financial advisor may not be acting in the customer’s best interests. VAs are often very high commission products, so switching a customer from one VA to another may signal an attempt by the broker or financial advisor to “double dip” on sales commissions.

FINRA levied $30.3 million in fines among 30 variable annuity cases in 2016, and filed 12 cases involving variable annuities, generating $510,000 in fines, through the first half of 2017. In May 2016, FINRA fined MetLife Securities $25 million for allegedly making misrepresentations and omissions of fact to customers in connection with VA replacement transactions.

If you have switched from one VA to another at the recommendation of a stockbroker or investment advisor, and you have suffered losses in connection with your investments, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Specifically, the Department alleges that Thrivent violated the Act by “… replacing its clients’ existing variable annuities for new variable annuities which required the clients to pay surrender charges and various fees.” According to the Department, possible violations of law in the case include (i) failure to maintain and enforce a supervisory system with adequate written procedures to achieve compliance with applicable securities laws and regulations, (ii) failure to adequately review the sales and replacements of VA’s for suitability, (iii) failure to enforce its written procedures regarding documentation of sales and replacements of VA’s, and (iv) failure to adequately train its salespersons, registered representatives and principals.

Prior to 2012, Thrivent rolled out a new feature to its VA. This feature consisted of adding a Guaranteed Lifetime Withdrawal Benefit (“GLWB”) to the VA in return for a rider fee. During the time period of January 2011 – June 2012 and July 2013 – June 2014, Thrivent allegedly recommended that certain customers purchase new variable annuities with GLWB riders to replace existing variable annuities, without performing any analysis of whether the customers would economically benefit from the variable annuity switch. Some customers who were advised to switch allegedly would have received greater payments over the life of the policies if they had kept their original variable annuities in place.

In general, VA products have a checkered history with regulators. Both the Financial Industry Regulatory Authority (“FINRA”) and the Securities & Exchange Commission (“SEC”) have issued numerous rulings, advisory documents and investor alerts warning that the sale of VA’s might be unsuitable and inappropriate under certain circumstances. Specifically, the SEC has warned about the risks and costs of switching VA contracts, encouraging investors to consider whether they can buy the insurance features embedded in a VA less expensively as part of the VA or separately. FINRA has warned investors that switching, or exchanging, a VA contract is generally not a good idea, due to bonus recapture charges, surrender charges, higher charges accompanying the new contract, unnecessary riders on the new contract, and whether the advisor is motivated by commissions.

When a broker or financial advisor recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor. In making this assessment, a broker must consider the investors income and net worth, investment objectives, risk tolerance, and other security holdings.

If you received an unsuitable recommendation of securities from a broker or investment adviser, including variable annuities, and suffered significant losses are a result, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Reportedly, the New York State Department of Financial Services (“DFS”) launched an investigation in 2011 concerning alleged omissions on the part of AXA Equitable regarding its applications for approval to alter the Equi-Vest and Accumulator variable annuities. The change would substitute ATM-managed funds for previous managers. According to DFS’ allegations, AXA Equitable misled DFS regarding the change’s impact and failed to disclose the underperformance of the ATM funds under the previous managers. Allegedly, these actions resulted in a reduced return for investors, especially for those who paid fees to receive guaranteed minimum benefits and those who wanted to be more aggressive in their investment strategy. In order to settle the investigation, AXA Equitable agreed to pay $20 million on March 17, 2014.

Some AXA Equitable investors may have been misled about the variable annuity contract changes. In addition, certain characteristics of variable annuities, including high penalties for early withdrawal, long surrender periods and low rate of return, make these products unsuitable for many investors. Many brokers are motivated to make unsuitable recommendations because of the large commissions associated with 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. According to attorneys, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

If you believe you were misled regarding Equi-Vest or Accumulator variable annuity contracts, or that you received an unsuitable recommendation to invest in variable annuities, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On March 27, a complaint was filed with the Financial Industry Regulatory Authority Office of Hearing Officers against Birli and Chapin regarding the State University of New York retirement program. According to the complaint, Birli and Chapin recommended their customers switch MetLife variable Annuities with new ones held outside the retirement plan in MetLife IRA accounts.

Allegedly, Birli and Chapin circumvented their firm’s general prohibition of direct annuities exchange by recommending to their customers that they surrender their annuities to purchase another product available within the retirement program, wait 90 days, and then sell the second product in order to purchase the MetLife IRA annuity.

According to stock fraud lawyers, the new annuities were unsuitable because their liquidity was affected by the seven-year surrender schedules they came with. Furthermore, investors lost accrued death benefits above and beyond their contract value. Allegedly, Birli and Chapin each received commissions of 7.15 percent through the switch.

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. According to securities fraud attorneys, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

If you suffered significant losses as a result of an unsuitable recommendation regarding variable annuities, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stockbroker claims lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against two MetLife Securities Inc. brokers, Patrick Chapin and Christopher Birli. According to the complaint, Chapin and Birli focused on advising State University of New York employees on their retirement plan. Both were terminated in 2012 and do not work in the securities industry at this time.

According to the complaint, Chapin and Birli allegedly made recommendations to 45 of their customers to unload their plan’s MetLife variable annuities by cashing in their annuities, purchasing another security within the plan to be held for 90 days, and then selling that security to switch to new variable annuities outside the university plan, held in IRAs. The alleged misconduct took place between 2004 and 2007. According to FINRA, this scheme generated commissions for the brokers amounting to hundreds of thousands of dollars.

According to stock fraud lawyers, the brokers’ actions exposed investors to unnecessary risks. Reportedly, in order to cash in their plan’s annuities, some investors were required to pay fees, and investor funds were tied up in the new annuities for up to seven years. Brokers have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Securities fraud attorneys say that many investors may have received unsuitable recommendations related to variable annuities.

If you received an unsuitable recommendation regarding variable annuities and suffered significant losses as a result, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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.

According to securities fraud attorneys, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Certain characteristics of variable annuities, including high penalties for early withdrawal, long surrender periods and low rate of return, make these products unsuitable for many investors.

Law Office of Christopher J Gray, P.C. attorneys are experienced in handling cases concerning unsuitable recommendations concerning variable annuities. If you suffered significant losses in variable annuities that were unsuitable for you, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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.

Typically, non-traded REITs carry a high commission, often as high as 15 percent, which sometimes motivates brokers to make unsuitable recommendations to their clients. Non-traded REITs may appear attractive to investors because they carry a relatively high dividend or interest. However, these investments are inherently risky and illiquid, which limits access of funds to investors and makes them unsuitable for many individuals with conservative risk tolerances and those who need easy access to funds.

According to investment fraud lawyers, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

If you received a recommendation to purchase non-traded REITs or variable annuities that were unsuitable given your investment objectives and risk tolerance, and suffered significant losses as a result, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

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.

Stock fraud lawyers say that in many cases, investment firms can still be held liable for a broker’s actions if their supervision of that broker was negligent. As a result, it may possible for investors to recover their losses from Holzer or the brokerage firm she was employed with when the fraud occurred.

If you have a claim arising from the conduct of Bambi Holzer or another financial advisor, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.”

If you suffered losses as a result of your investment in the Retail Properties of America Inc. REIT, formerly known as Inland Western REIT, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

FINRA’s findings also indicate that the firm ignored red flags regarding the representatives. These red flags included multiple customer complaints. Some of these complaints, which were on Uniform Application for Securities Industry Registration, were related to annuity sales.

Cadaret Grant has agreed to offer rebates of the original policies’ purchase price, plus interest and charges, and rescind the policies’ purchase. Furthermore, they will comply with a comprehensive review of policies and procedures related to the suitability of variable annuities.

If you believe you have been the victim of variable annuities fraud, either through dealings with Cadaret Grant, or any other firm, find out more about your legal rights and options by contacting a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

Another concern stated in FINRA’s letter is that of fees. FINRA states, “We remain concerned about firms’ charging retail investors hidden, mislabeled or excessive fees.” In fact, FINRA brought several cases related to excessive fees against broker-dealers in 2011.

Other priorities listed by the agency are oversight of the creation and redemption of exchange-traded funds and high-frequency trading.

In the letter, FINRA also stated that it is targeting high-risk firms with its enforcement efforts and undertaking a “broader data collection effort.” Red flags for FINRA monitoring are inadequate cash flow in investment and lack of liquidity.

Investors who believe they have been the victim of stock broker fraud can seek the recovery of their losses through FINRA securities arbitration. If you believe you have a valid claim, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

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.

Tatro already has more than 60 complaints against him and $3 million has been awarded to his clients so far. Other claims are pending and Tatro has clients all over the United States that could potentially have valid complaints that could end in the recovery of investment losses. If you have suffered losses because of the recommendations of William Tatro, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

The rate of return on variable annuities is often higher than fixed annuities and does not have a rate of return that is predetermined. However, payoffs received from annuitizing are very small and expenses associated with a variable annuity can exceed 2 percent annually, which is significantly higher than other investments, such as index funds.

To some investors, variable annuities are preferable to a conventional IRA because they can put as much money into an annuity as they desire. Also unlike conventional IRAs, money placed into an annuity is not tax deductible. However, it is important to note that this type of investment only makes sense if it is affordable for the investor to have their money locked into the investment for at least 10 years.

Variable Annuity Fraud

According to MSN Money, variable annuity fraud is one of the top ten investment scams. The most notable complaint made by investors is the “omission of disclosure about costly surrender charges and steep sales commissions.” Furthermore, according to the North American Securities Administrators Association, these investments are often pitched through investment seminars and are aimed at seniors looking to protect their retirement and loved ones. However, according to regulators, variable annuities are unsuitable for many individuals, especially those that cannot leave their investment tied up in the annuity for at least 10 years. Therefore, brokers who make unsuitable recommendations of variable annuities are in violation of the Suitability Standard.

If you believe you were sold a variable annuity when the investment was clearly unsuitable to your investment goals, or if the entity that sold you the annuity failed to disclose surrender charges and/or commissions, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.