Investors Harmed By Faulty Variable Annuity Exchanges Have Recourse

Two recent enforcement actions from the Financial Industry Regulatory Authority Inc. demonstrate FINRA’s attention on variable annuities, especially faulty annuity exchanges.

Brokers typically recommend clients replace annuities under Section 1035 of the tax code. That provides a tax-free transfer for the client, but also generates additional commission for the broker. As such, 1035 exchanges are typically how abusive account churning occurs with annuity products.

Clients can incur higher annuity fees and surrender charges due to the exchanges, but they also can have significant tax liabilities because the brokers, in trying to conceal their abuse, don’t categorize the annuity replacements as 1035 exchanges.

FINRA levied $30.3 million in fines among 30 variable annuity cases in 2016, including a $25 million penalty against MetLife Securities Inc. in May for negligent behavior regarding variable annuity replacements.

If you or someone you know lost money in a variable annuity exchange, you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

CMD Investigating Claims Against Legend Securities, Inc., Hank (Henry) Werner and Michael Stanton for Excessive Trading, Churning and Failure to Supervise

Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against Legend Securities, Inc., Henry Werner and Michael Stanton for excessive trading, churning and failure to supervise.

FINRA has filed a complaint against Legend Securities, Inc., Michael Salvatore Stanton and Henry (Hank) Werner alleging that Mr. Werner churned and excessively traded each of a customer’s three accounts, charging more than $243,000 in commissions and fees, and causing the customer net losses of nearly $184,000, within just over three years. The complaint alleges that Mr. Werner willfully violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act, and FINRA Rule 2020.  The complaint also alleges that Mr. Werner recommended an unsuitable variable annuity exchange to the customer, without having a reasonable basis to believe that the transaction was suitable.  The complaint further alleges that Legend failed to enforce its written supervisory procedures (WSPs), to prevent Mr. Werner from churning and excessively trading the customer’s brokerage accounts. Legend and Mr. Stanton failed to adequately investigate red flags demonstrating that Mr. Werner was churning the customer’s accounts. Legend and Mr. Stanton also failed to adequately investigate, or simply ignored, that Mr. Werner engaged in aggressive, “in-and-out” trading, repeatedly purchasing securities and then selling them after relatively short holding periods to purchase other securities, for no apparent reason.  Such in-and-out trading is a hallmark of excessive trading and churning.

If you or someone you know lost money investing with Henry (Hank) Werner and/or Legend Securities, you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.