Pacific Life was founded in 1868 in San Francisco. Its first president was Leland Stanford, who was later a California Senator. Stanford also founded Stanford University, which was bailed out financially by his widow soon after his death.
Pacific Life survived San Francisco’s great earthquake in 1909 when an office manager thought to remove the firm’s bearer bonds as he left the building. The structure was then leveled by firefighters as a firebreak. A Los Angeles based life insurance company had just been acquired and the firm’s headquarters were thus moved to that city.
As did other such firms for tax breaks, Pacific Life became a “mutual” life company, owned by its shareholders. After celebrating its 100th anniversary, with a keynote speech by Governor Ronald Reagan, the company soon relocated to Newport Beach. Its seashore image is now built around a rolling humpback whale. In 1997, Pacific Life converted back from a mutual to a corporate structure by issuing stock to policyholders. Unlike many other life insurance firms which have reverted form the mutual structure, Pacific Life it has not at this time gone public.
In 1971, Pacific Life launched PIMCO as an investment management subsidiary which offers services to employee benefit plans, endowments, and foundations. Through a reverse merger in 1994, PIMCO Advisors became a publicly traded company, primarily managing fixed-income securities; currently it is total of almost half-trillion dollars.
Pacific Life has acquired a number of securities broker-dealer firms, including Florida-based Mutual Service Corporation, servicing over 2,000 registered representatives, Los Angeles-based Associated Securities Corp., with 340 representatives and Beverly Hills-based M. L. Stern & Company with 140. It also acquired majority interest in United Planners’ Financial Services of America, an Arizona-based broker-dealer with 330 representatives. In 1999, it acquired Tower Asset Management, a fee-based investment advisory firm. Sorrento Pacific Financial became yet another piece of the puzzle.
These, and other securities firm subsidiaries, came to be operated under common management through Pacific Select Group LLC, a division of Pacific Life. However, in March 2007, it was announced that rapidly growing LPL Financial Services, a nearby La Jolla based firm, was acquiring three of Pacific Life Insurance Company’s broker-dealers–Mutual Service Corporation, Associated Financial Group, and Waterstone Financial Group. Collectively, these three broker-dealers have 2,200 financial advisors serving retail clients and $353 million in revenues. It was said this would increase LPL to 10,000 brokers, the company’s goal prior to an IPO.
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Litigation was filed against Pacific Life Insurance Company over variable annuity sales practices. Notices were mailed to a class of about 120,000 people who purchased variable annuities in qualified retirement plans – including individual retirement accounts – from Pacific Life Insurance Co.
The claims included that Pacific Life and its sales force committed failed to disclose to investors that their plans already had tax deferrals and that this potentially costly feature of variable annuities was unnecessary.
The plaintiffs charged that the insurance company also failed to consider the suitability of such investments. Documents filed in the case pointed to evidence said to demonstrate that Pacific Life was targeting investors who rolled over their retirement funds into individual retirement accounts while not disclosing that the tax deferral was superfluous.
A company spokesman stated: “Pacific Life strongly disagrees with the claims in the lawsuit and we are vigorously defending ourselves.” The case is now pending.
In 2005, Pacific Life’s M.L. Stern securities unit was fined by request of the Municipal Securities Rulemaking Board for failing to provide customers with official statements (prospectuses) in a timely manner and failing to file proper forms with the Board.
The previous year M.L. Stern had been fined for “inaccurate reporting” to the MSRB and “erroneous municipal filings.” Three years earlier the MSRB had requested fines for inaccurate information on more than 50 municipal orders.
The NASD fined the same Pacific Life unit in 2004 for permitted two registered persons to engage in securities business while their licenses were inactive for failure to complete requirements. Prior to all such actions, the firm had been censured and fined at least four times for reporting and other violations. The firm consented to all such fines and other sanctions described above without admitting the claims.
The State of Illinois at one time considered revocation of M. L. Stern’s license for reporting failures.
Investors have filed a number of claims in securities arbitration against the M. L. Stern brokerage subsidiary of Pacific Life with several of such claims resulting in monetary awards paid by the company to the investors.
In one such claim the investor sought recovery apparently claiming fraudulent activities, misrepresentation, breach of fiduciary duty, churning and negligence. While the arbitration award did not specify the reason, the investor was awarded $89,000.
In another arbitration claim filed against the same company, the investor asserted claims involving unsuitable investments, churning and other account related negligence. While the award in that case as well did not specify the reason for the award, the investor was awarded $374,346.
Other similar claims against the company have resulted in awards of smaller amounts to investors. A substantial number of other claims have been filed against the company by investors which did not result in awards to these investors.