Articles Posted in Annuities

New FINRA Arbitration Claim Seeks $260K in Damages 

Former Wells Fargo Clearing Services (WRET) broker Herbert Lee Weith IV is named in yet another customer dispute in which the claimant is seeking damages for losses involving variable annuities. Weith, who was a Wells Fargo broker from 2012 to 2019 in Naples, Florida, became a registered investment advisor for Equitable Advisors, LLC, in Columbia, Maryland from January to October of 2020.

Our Florida broker fraud attorneys have been looking into complaints by ex-Wells Fargo customers of Weith who suffered serious investment losses that may have been caused by unsuitable investment recommendations. Contact our attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm at today. 

The Financial Industry Regulatory Authority has put out a new investor alert warning about advertisements that are marketing higher-than-average CD yields. The self-regulatory authority says that some of the ads might be an attempt to get investors to buy a much more much more expensive investment, such as a fixed or equity-indexed annuity, that is not risk free. Often, the alternative investments are insurance products.

FINRA warned that with most CD promotions that are marketing ploys, an investor would be required to go to an office or talk to a salesperson, who may try to convince the prospective buyer to purchase an alternative product that is not a CD. Typically, the minimum purchase amount is high, such as $25K. Such ploys would also tout a “bonus”-a sum the salesperson would pay you plus the average percentage yield of the CD. FINRA warns that this bonus is actually an incentive to get you to hear the pitch for the more complex product. Meantime, the seller may be earning a high commission for making the sale.
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In the wake of regulator scrutiny, Voya Financial Advisors is once again placing restrictions on its sale of variable annuities. The regulators are wondering whether the products are appropriate for investors who are saving for retirement. Variable annuities have been getting a lot attention from regulators from FINRA, the U.S Securities and Exchange Commission, and the Labor Department, which oversees retirement benefit plans that provide tax benefits and are sponsored by employers.

InvestmentNews reports that according to internal documents, Voya said that it would no longer approve the sale of C share variable annuity contracts if the contract has add-ons that cost extra. It was just last month that the firm placed the same restriction on variable annuity contracts involving L shares.

Zoya brokers will now have to provide clients with an analysis, prepared by Morningstar Inc., of each annuity contract’s cost in dollars. They also will have to get a client’s signature before selling the new annuity.
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SusanWalker, an ex investment adviser with Ameriprise Financial Inc. (AMP), has pleaded guilty to bilking two dozen clients of $980,000. She stole the funds from clients between ’08 and ’13, using the money to cover her own spending, including costly vacations.

Walker is accused of setting up investment accounts under several customers’ names but without their consent. She took money from clients’ retirement and brokerage accounts, placed the funds into the accounts under her control, and took out the funds to spend as she pleased. Ameriprise has paid back the customers that were harmed.

The firm fired Walker and her mother Barbara Stark in early 2013. Stark is not charged in this criminal case.

The Financial Industry Regulatory Authority has decided to pay closer attention to the sale of fixed annuities in part because brokerage firms are selling a larger chunk of indexed annuities these days. Regulators want to examine the procedures and policies involving clients giving up or trading variable annuities to place the assets into equity indexed annuities and other products.

According to InvestmentNews, broker-dealers are becoming a force in the indexed annuities era. They were accountable for 11.4% of the market’s share last year, an 8.9% jump from the year before. In a report, the Insured Retirement Institute said that the US annuity industry made $220.9 billion in sales in 2013. Fixed annuity sales for that year was $78.1 billion. Indexed annuities sales hit $38.6 billion.

During this first quarter, reports InvestmentNews, LPL Financial (LPLA), which is the biggest independent brokerage firm, saw a surge in fixed annuities sales. Revenues of fixed income was $46.7 million-70.8% more than during the first three months of 2013.

According to the Wall Street Journal, Guggenheim Partners, Harbinger Capital Partners, and Apollo Global Management are just some of the money managers who have begun to acquire fixed annuities. These investments, which were sold by life insurance companies to conservative savers for decades, are now being seen by these newest buyers as a way to increase money under management. Many of these entities, which are controlled by private-equity groups, hedge funds, and other investment managers, believe that their investment savvy will allow them to discover profits where traditional insurance companies were unable to do so. Such acquisitions could provide a more stable income source.

For example, following its acquisition of a couple of midsize insurers this summer by its affiliates, Guggenheim, the $160 billion money manager. won credit-ratings upgrades. Meantime, Athene Annuity & Life, which said it would pay $415 million for Presidential Life Corp., will add about $3.5 billion in assets if Presidential shareholders approve the deal. As for Apollo Global Management, it is seeking to establish a retirement-savings company that is a market leader.

Some of these new annuity owners are offering products that come with terms that are now more generous for clients, while others want to make money off the business blocks they’ve acquired. The National Organization of Life & Health Insurance Guaranty Associations says that to get US consumers to buy annuities, firms have to set up state-based insurance units that are governed by the same risk-based-capital rules that other insurers have to follow.

Forethought Financial Group, a privately-owned Houston based firm, is bringing more annuities business to Texas with its purchase of The Hartford Financial Services Group Inc. (HIG)’s annuities units. The deal was announced on April 26. It was just in March that The Hartford made it known that it was planning to get out of the annuities business to focus on mutual funds, group benefits, and property and casualty insurance. It will will, however, keep managing is current annuity policies.

The Hartford had reported huge earning losses in its annuities business. Earnings dipped from $96 million during to 2010’s final quarter to $86 million during 2011’s last quarter and its overall net income had also plunged downward to $127 million from $619 million the year before. Low interest rates also hurt the financial firm.

The terms of the sale to Forethought were not revealed. However, the Texas firm is buying The Hartford’s distribution, management, and marketing units.

Independent insurance agent Glenn A. Neasham has been convicted for felony theft for selling a complex annuity to an elderly woman who was suffering from dementia. Neasham, who maintains that the woman seemed fine when the transaction was made in 2008, contends and that he acted appropriately. Now, other insurance agents say they are having second thoughts about offering this financial product.

“Indexed” annuities are savings products that pay interest tied to how the stock- and bond-market indexes perform. An insurance agent gives the buyer a guarantee that the latter won’t lose any principal as long as the investor doesn’t withdraw his/her money early when steep penalties would otherwise ensue.

A lot of insurance agents like annuities because they can earn high commissions (12% or greater of the amount invested).from insurance companies. Annuity sales have increased by over four times in the last 10 years as a volatile stock market and low interest rates attracted buyers.

Two men are accused of Texas securities fraud involving the sale of bogus annuities to the elderly. The authorities arrested Leon Randy Sinclair III, a 53-year-old Houston man, on charges of theft by deception, misapplication of fiduciary property, and money laundering. Sinclair and his San Antonio-based business partner, Luther Pierce Hendon, allegedly transferred money from the investment policies into their own bank accounts.

Dozens of elderly persons were reportedly bilked out of their life savings while the two men allegedly stole millions of dollars. The elderly clients were sold charitable gift annuities that they thought would go toward their savings for the future. Unfortunately, per the criminal complaints filed against Hendon and Sinclair, the money they were investing actually went to the two men.


Missouri Secretary of State Robin Carnahan says that A.G. Edwards & Sons LLC will pay $755,000 to settle charges over improper annuity sales. The financial firm allegedly sold variable annuities without the necessary documentation to elderly clients. The Missouri’s Securities Division, AG began its investigation because an 18-year-old Missouri resident reported noticing irregularities after the liquidation of a variable annuity.

Per the investigation’s findings, AG Edwards, now known as Wells Fargo Advisors after Wachovia Corp. acquired it and the latter was later acquired by Wells Fargo & Co. (WFC), sold the annuities to elderly clients but failed to maintain proper records of transactions. This lack of proper documentation prevented the annuity sales, which occurred between July 2006 and June 2007, from being in compliance with company policy and state law.

At least 31 Missouri investors were affected by this oversight. They will receive $381,993. The Missouri Investor Education and Protection Fund will get $375,000. The Missouri’s Securities Division will be reimbursed the $50,000 it cost to probe the investor complaint.

In a release issued last month, Carnahan said that she appreciated AG Edwards’s willingness “to work with my office.” She also reminded investors that if they believe their investment is at risk, they can always contact her office for help. Meantime, Wells Fargo Advisors says it is pleased that these “legacy issues” have been resolved.

More Blog Posts:
Protect Yourself from Texas Securities Fraud by Making Sure that the Company or Agent that Sells You Annuities Has a Valid Insurance License, Stockbroker Fraud Blog, March 13, 2010
Market Timing Violations Against AG Edwards & Sons Inc. Supervisors and Broker Upheld by the SEC, Stockbroker Fraud Blog, October 17, 2009 Continue Reading ›

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