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Investor Protection

Customers: Beware What You Sign

May 19, 2020

[Image: Signage /  Ebay]


by Howard Haykin



Writing with an “air of authority,” a broker sent letters to at least 11 customers claiming that … 1) a Third Party Authorization Form was necessary to allow him to continue servicing the variable annuity policy (they each purchased from him); 2) the Authorization was triggered by the Department of Labor's "Fiduciary Rule;" and, 3) taking no action may limit the customers' choices going forward.
Relying upon the broker’s representations, the customers signed the Third Party Authorization Forms, which the broker subsequently used to withdraw more than $150,000 from their variable annuity accounts.



These written statements were false because … 1) the Authorization was not necessary to allow the broker to continue servicing the policy; 2) no part of the Department of Labor's "Fiduciary Rule" triggered a requirement for customers to sign the Form; and, 3) taking no action regarding the Form had no effect on the customers' choices going forward.



The broker’s actions were intentional … i.e., he preyed on vulnerable individuals who, in many cases, were financially unsophisticated, elderly, or parents of children with developmental disabilities. The broker initially met them through his approved outside business activity (OBA), a company that purportedly specialized in financial planning for parents and caregivers of individuals with special needs and advised the customers about Medicaid eligibility and other long-term care and special needs matters.



INVESTOR TAKE-AWAYS.    Before giving another person access to your brokerage or insurance account, consult with a trusted professional who has nothing to do with the account(s). Particularly when such authorizations assign authority to withdraw funds from an account. SAFETY FIRST.   



[For further details, click on … FINRA Case #2018057690301.]