BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Big Banks
- Regulatory Sanctions
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Broker Caught Dumping Unsuitable Annuities on Customer
by Howard Haykin
James Cox agreed to a $10K fine and a 4-month suspension, and he was ordered to pay $25K plus interest in disgorgement of commissions, to settle FINRA charges that he recommended unsuitable annuity transactions for a customer. Cox also failed to provide prior written notice of an outside business activity.
BACKGROUND. Cox, a resident of Baton Rouge, LA, has 23 years’ experience with 5 firms. From 2009 until 4/26/17, Cox served as a General Securities Principal, General Securities Rep, and Variable Contracts Products Rep for Sterne, Agee & Leach and its successor firm, Stifel, Nicolaus $ Company. Cox currently is not associated with a FINRA member firm.
FINRA FINDINGS. In September 2014, Cox recommended the following unsuitable transactions to his customer:
- Exchange an existing variable annuity (V/A) for a new variable annuity;
- Sell an existing V/A to purchase 2 fixed equity-indexed annuities; and,
- Liquidate 3 additional V/A’s.
The existing annuities all provided for guaranteed minimum income available upon annuitization that was equal to 3 times the premiums paid. The customer (“NR”) was 59 years old at the time of the recommendations, and the growth potential of the income streams was of primary importance to her.
The new V/A and 2 fixed annuities did not offer the same income growth potential. Furthermore, the liquidations provided no guaranteed income. In addition, in the event that NR chose not to annuitize, the existing products offered higher death benefits than the new products. Moreover, with regard to the exchange recommendation, NR was exposed to the risk of incurring surrender charges with the new 7-year surrender period.
Outside Business Activity. That same month, September 2014, Cox charged NR $2,500 for consulting services that he provided in connection with the construction of a modular office building for her medical practice. Cox failed to provide prior written notice to the firm.
FINANCIALISH TAKE AWAYS. Variable annuity contracts offer attractive commission payouts. For some brokers, that's an invitation to recommend contract exchanges - even when a replacement policy offers few if any advantages over the existing contracts. So here's a customer who may or may not be repaid the $25,000 in commissions she paid out for 'inferior' annuity contracts, and she's essentially locked into a new 7-year surrender period. Wonder if Sterne Agee offered to rescind the transactions. FINRA offers no further details.
This case was reported in FINRA Disciplinary Actions for August 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015047812901.