Broker Suspended for Unsuitable Annuity Recommendations

FINRA suspended a broker for recommending unsuitable annuity contracts and for related recordkeeping failures. 

According to the AWC, the broker recommended variable annuity contracts to three customers that failed to align with the customers' "age, financial situation and needs, liquidity requirements, and investment time horizons." 

FINRA found that the broker recommended a $100,000 variable annuity to a married couple—one of whom was a senior—without a reasonable basis, despite their "short-term liquidity needs" and lack of use for features like "the annuitization option or its death benefit." FINRA said the broker placed the entire investment in a single, undiversified subaccount that conflicted with the customers' "low-risk tolerance," resulting in over half their net worth being tied up in variable annuities. FINRA found that the broker also recommended a $6,000 variable annuity to a 33-year-old without considering "long-term fee impact, surrender charges," or less costly alternatives, even though the customer had "no interest or need" for the annuity's features.

FINRA also found that the broker "inaccurately stated" on variable annuity applications that the three customers "intended to utilize the annuitization and death benefit features of variable annuities" and misstated two of the customers' "investment horizons."

FINRA determined that the broker violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2330 ("Members' Responsibilities Regarding Deferred Variable Annuities") and 4511 ("General Requirements"). 

To settle the charges, the broker agreed to (i) a four-month suspension from associating with any FINRA member in any capacity and (ii) pay a $5,000 fine.