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Regulation and Compliance > Federal Regulation > SEC

SEC Sues In Connection With Annuity Lead Sales

By Staff Writer

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The U.S. Securities and Exchange Commission has accused a former stockbroker of selling confidential information about annuity customers without getting the customers’ permission.

The SEC has filed a complaint against the broker, Sidney Mondschein of Castro Valley, Calif., in the U.S. District Court in San Francisco.

In the complaint, SEC officials accuse the broker of securities fraud and regulatory violations in connection with the lead sales.

Mondschein could not immediately be reached for comment.

From December 2002 through August 2005, Mondschein sold the names, addresses, telephone numbers and, in some cases, annuity investment amount figures for about 500 customers to 6 insurance agents, SEC officials allege.

Many of the customers were elderly, and most of them already had bought fixed or equity-indexed annuity products, officials allege.

Mondschein sold the agents the leads to enable them to sell more annuities, officials allege.

“Mondschein never disclosed to any of these customers that he intended to sell, and did sell, their confidential personal information to insurance agents,” and he also misrepresented the relationship he had with the agents, officials allege.

SEC officials report that the agents paid about $50 to $150 per lead, or 2% of the total amount that a customer associated with a lead invested in a new annuity.

Agents encouraged clients to have Mondschein liquidate the clients’ old annuities, rather than the clients going through their usual brokers, and Mondschein formed a separate entity, UNCI Inc., to handle the transactions without telling his broker-dealer firm about UNCI, officials allege.

The SEC is seeking a judgment ordering Mondschein to pay civil penalties and give back ill-gotten gains, with interest.

The SEC also is seeking a judgment against UNCI.

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