Retirement

Published on: June 28, 2018

Mass. Regulator: MetLife Allegedly Failed To Contact Retirees About Benefits

Piggy Bank in a Cage On June 25, 2018, the Enforcement Section of the Commonwealth of Massachusetts Securities Division (“Division”) filed an Administrative Complaint (“Complaint”) against Respondent MetLife, Inc. (“MetLife”) in connection with alleged violations of the Massachusetts Uniform Securities Act (the “Act”). Specifically, the Division has alleged that MetLife, through a line of business known as pension risk transfer, “negligently relied on inadequate procedures to contact certain retirees, many of whom may be completely unaware that their former employer has offloaded its pension responsibilities to MetLife.” MetLife purportedly failed to make a good faith attempt to contact certain Massachusetts retirees due group annuity benefits, and as alleged in the Complaint, the insurance company did not take reasonable steps, such as through certified mail, e-mail, or telephone calls, to contact numerous pensioners, including over 400 Massachusetts retirees.

As alleged in the Complaint, MetLife categorized numerous living retirees as “Presumed Dead.” Consequently, the Division has alleged that MetLife stopped making pension payments to certain Massachusetts annuitants (in some cases, dating back 10 years), and further, caused negligent material misstatements to be made in certain MetLife public disclosures as filed with the SEC. According to the Complaint: “MetLife’s negligent administration of its pension risk transfer business caused MetLife to make materially misleading misstatements in its public filings. The Division brings this action pursuant to the antifraud provisions of the Act, to ensure that MetLife identifies and locates those retirees to whom it owes benefits, and immediately effects all retroactive and continuing payments, plus interest, to Massachusetts retirees.”

According to the Division, MetLife only sent “two bureaucratic, perfunctory letters” to Massachusetts retirees, one at age 65 and one at age 70 ½. When retirees failed to respond to these letters, MetLife allegedly released the retiree’s benefit amount from its reserves (thus effectively transferring a liability to an asset on the company’s balance sheet), without confirming that the retiree was actually deceased. As alleged in the Complaint: “After two unsuccessful attempts to contact its annuitants, MetLife released the full liability based on the unreasonable presumption that these annuitants would never respond and had not become entitled to benefits based on certain contractual provisions.”

Published on: October 11, 2017

Variable Annuity Switching, Subject of FINRA Crackdown, May Signal Broker Abuses

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) has filed two recent enforcement actions that may signal a crackdown on variable annuity (VA) misconduct this year, continuing a 2016 trend of high fines related to VA sales in 2016.

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.

Published on: June 1, 2017

LPL Fined by State of NH for Alleged Unsuitable REIT Sales

by InvestorLawyers

For some time we have been blogging about non-traded REITS (and the real risks associated with investing in these complex investment vehicles. Many investors are familiar with exchange traded Real Estate Investment Trusts (“REITs”). Pursuant to federal law, these companies which own and typically operate income-producing real estate, are required to distribute at least 90% of their taxable income to investors in the form of dividends. Because REITs pay out such a high percentage of their taxable income as dividends, these companies have attracted numerous retail investors (including pensioners and other retirees) seeking to augment their income stream.

While an appropriate allocation of REITs in a retail investment portfolio may well be suitable and warranted in order to achieve diversification and earn decent income, non-traded REITs are an altogether different and often risky investment vehicle. The primary risks associated with non-traded REITs include: (1) a lack of liquidity – non-traded REITs do not trade on an exchange, and therefore, any secondary market for resale will be restricted; (2) pricing inefficiency – in lockstep with their lack of liquidity, investors in non-traded REITs may find that the price offered for share redemption is substantially lower than the price at which shares were initially purchased; (3) high up-front fees – compounding the risk with non-traded REITs are the often steep up-front fees charged investors (as high as 10% for selling compensation) simply to buy in and purchase shares; and (4) confusion over source of income – often, investors in non-traded REITs are unaware that dividend income may actually include return of capital (including possible the proceeds from sale of shares to other, later investors).

THE NEW HAMPSHIRE BUREAU OF SECURITIES REGULATION PROCEEDING AGAINST LPL FINANCIAL

Published on: May 22, 2017

State of Illinois Charges Thrivent Over Variable Annuity Switching

by InvestorLawyers

The State of Illinois Securities Department (“Department”) recently initiated enforcement proceedings against Thrivent Investment Management, Inc. (“Thrivent”) (CRD #18387) for allegedly violating the Illinois Securities Law of 1953 in connection with sales of unsuitable variable annuity (“VA”) products to certain of its clients who already held Thrivent VA’s.

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.

Published on: April 24, 2014

Customers Could Recover Losses for Unsuitable MetLife Variable Annuity Recommendations

by InvestorLawyers

Securities attorneys are currently investigating claims on behalf of the customers of Christopher B. Birli and Patrick W. Chapin, who suffered significant losses as a result of misrepresentations and unsuitable recommendations of variable annuities. Reportedly, Birli and Chapin received significant sales commissions for allegedly unsuitable recommendations to their customers.

Customers Could Recover Losses for Unsuitable MetLife Variable Annuity Recommendations

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.

Published on: April 10, 2014

Two MetLife Brokers Accused of Unsuitable Variable Annuity Sales

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in variable annuities. Variable annuities are insurance products tied to an investment portfolio, which typically consist of mutual funds that hold bonds and stocks. In many cases, brokers receive commissions as high as 8 percent when selling variable annuities, which may motivate them to make recommendations that are unsuitable for investors.

Two MetLife Brokers Accused of Unsuitable Variable Annuity Sales

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.

Published on: April 3, 2014

Claims Against Berthel Fisher for Unsuitable Sale of Alternative Investments Begin

by InvestorLawyers

Our recent blog post, “Berthel Fisher and Affiliate Fined Regarding Sales of ETFs and Non-Traded REITs,” reported that in February the firm had been fined $775,000 by the Financial Industry Regulatory Authority (FINRA). The FINRA fines addressed alleged supervisory failures, including failure to properly supervise the sale of alternative investments like leveraged and inverse exchange-traded funds (ETFs) and non-traded real estate investment trusts (REITs). One claim has already been filed by investment fraud lawyers on behalf of a retired woman in Minnesota.

Claims Against Berthel Fisher for Unsuitable Sale of Alternative Investments Begin

According to the claim, the woman was sold non-traded REITs and other alternative investments by Jonathan Pyne, a broker for Berthel Fisher. The claim argues that her age and low risk tolerance made the investments unsuitable for her. The investments included:

Inland American Real Estate Trust

Published on: March 18, 2014

Recent News Regarding Puerto Rican Bonds

by InvestorLawyers

Investment fraud lawyers continue to investigate claims on behalf of individuals who suffered significant losses in Puerto Rican bonds after the value of these investments plummeted in 2013, causing many investors to suffer significant losses. In addition, securities arbitration lawyers are keeping an eye on recent news that indicates investors may be able to pursue their claims in continental Unites States venues, rather than in Puerto Rico, due to the shortage of FINRA arbitrators on the island.

Recent News Regarding Puerto Rican Bonds

A claim was recently filed on behalf of a former client of Luis Fernandez and Angel Canabal against UBS Financial Services Incorporated of Puerto Rico and UBS Financial Services Inc. According to the claim, the retired client invested the majority of his life savings based on the recommendation of Fernandez in UBS proprietary bond funds, which were primarily invested in Puerto Rican debt. Allegedly, these investments were risky, illiquid and unsuitable for the investor.

The claim also alleges that the risks of the investments were not explained to the client, and that UBS made a recommendation that he borrow more money to be invested in the proprietary funds from a UBS-related company. The account was later taken over by Canabal, who allegedly told the investor that the recommendations were sound, the account wasn’t invested aggressively, and no changes were required.

Published on: February 20, 2014

Have Your Loved Ones Been the Victims of Affinity Fraud?

by InvestorLawyers

Investment fraud lawyers continue to investigate claims on behalf of elderly individuals who have been the victims of affinity fraud. In many cases, it is up to the children and grandchildren of elderly individuals to discover and put a stop to the victimization of their loved ones by fraudsters.

Have Your Loved Ones Been the Victims of Affinity Fraud?

A recent article in Forbes examined why elderly parents are susceptible to scams that seem obvious to younger individuals. According to the article, there are three main reasons for this: isolation and loneliness, diminished cognition and feelings of financial insecurity. Fraudsters know how to talk to lonely elders in a way that garners trust and makes them feel engaged. In addition, Alzheimer’s Disease research indicates that the first kind of judgment to be impaired is financial judgment, which may go undetected in the beginning stages of Alzheimer’s.

In one example, Gary H. Lane, a former Bank of America financial advisor, pleaded guilty to five counts of tax evasion and 12 counts of fraud on September 3, 2013 and was sentenced to a 10-year prison sentence on February 10, 2014. Allegedly, Lane defrauded six investors of more than $2 million from January 2010 until March 2011. During that time, Lane was reportedly employed by Bank of America Investment Services. Allegedly, Lane convinced these clients to invest their money through an E-trade account instead of following normal bank procedures.

Published on: February 6, 2014

Icon Leasing Fund Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses because of the unsuitable recommendation and sale of Icon Leasing Funds. An arbitration claim was recently filed on behalf of a retired woman who was sold these risky, illiquid investments by WFG Investments Inc. and NFP Securities Inc.

Icon Leasing Fund Investors Could Recover Losses

Specifically, potential claims involve the Icon Leasing Fund Eleven LLC and Icon Leasing Fund Twelve LLC. Allegedly, the advisor who sold the investments did not adequately explain that the funds operated as an equipment leasing program. The nature of the investment, in which capital is pooled for equipment subject to a lease, made it very risky and illiquid.

According to securities arbitration lawyers, during the offering period, the funds paid healthy distributions. However, not long after the funds were no longer for sale to new investors, the investment’s value began to rapidly decline and dividend payments became erratic. On December 31, 2012, Icon Leasing Fund 12 had suffered a 53 percent loss in value from the original offering price. For the same time period, Icon Leasing Fund Eleven suffered a staggering 84 percent decline in value.