Banc One Securities Corp. (BOSC) says it will pay $225,000 to settle Financial Industry Regulatory Authority (FINRA) charges that it made “unsuitable” sales of deferred variable annuities to 23 clients—21 of them elderly customers over 70 years of age.
FINRA says that BOSC representatives told clients that they should exchange their fixed annuities for variable annuities, which all 23 clients did. The SRO says that the clients then placed 100% of their assets into the variable annuity’s fixed-rate fixture. The payment was 3% maximum.
FINRA says that considering each client’s age, financial situation, investment goals, and income needs, the recommendations were inappropriate. FINRA says that BOSC should have properly supervised these transactions and that oversight procedures and policies failed to require that supervisors look at and assess certain information.
FINRA says that the deferred variable annuities recommendations did not appear to be intended to benefit the customers. Instead, the clients had to pay additional sales charges and their money was locked up.
As part of the settlement agreement, BOSC let all 23 clients sell their deferred variable annuities without incurring any penalties—there is usually a mandatory six-year “surrender” period.
BOSC is not admitting to or denying the charges by agreeing to settle. BOSC, in 2006, merged with JP Morgan Securities Inc.
Financial firms and broker dealers are supposed to always act in their clients’ best interests when making investment recommendations. When failure to act in these best interests results in losses for a client, that person has the right to pursue financial recovery.
Related Web Resources:
Banc One fined for deferred VA sales, Investment News, January 29, 2008