Just because you have been honored and rewarded for ethical behavior in the past does not mean you are exempt from making mistakes going forward that can damage your reputation as well as your pocketbook.
Case in point: The events of the past year for James E. Moniz, MSFS, a financial consultant with Northeast Wealth Management in Braintree, Mass.
In May of 2013, Moniz qualified for the prestigious John Hancock Financial Network Hall of Fame by earning the company’s annual ACE (Achieving Client Excellence) award 15 times over the course of a career. The award highlights client excellence, personal ethics and integrity, and the ability to solve clients’ financial needs.
But in October of 2013, Moniz was terminated by John Hancock for conduct uncovered during an investigation by the Massachusetts Attorney General’s office.
On Sept. 26, 2014, it was announced by Attorney General Martha Coakley that Boston-based John Hancock Life Insurance Company (U.S.A.), along with its subsidiary broker-dealer, has agreed to refund senior citizens in Massachusetts more than $550,000 to settle allegations that it failed to supervise one if its representatives—Moniz—permitting him to sell unsuitable variable life insurance policies, variable annuities, and other insurance and financial products.
Under the settlement, John Hancock, which didn’t admit wrongdoing and cooperated fully with the Attorney General’s investigation, will make 145 additional refund offers to consumers, primarily seniors, who purchased certain variable annuities and variable life policies from Moniz. The insurer also will pay $165,000 to the Commonwealth under the settlement.
According to the settlement, Moniz developed an association with a mortgage broker from a separate company to induce senior clients to take out reverse mortgages and invest the proceeds in unsuitable variable annuities. As a result of the Attorney General’s investigation, it is alleged that John Hancock unfairly failed to effectively supervise Moniz’s marketing and sales practices.
Back in June of this year, Moniz consented, without admitting or denying the allegations made against him by FINRA, to a six-month suspension from associating with any FINRA member firm in any capacity and a $25,000 fine in resolution of FINRA Disciplinary Proceeding No. 2013036095001. That suspension is scheduled to end in December.
FINRA alleged that Moniz, while employed by Signator Investors, Inc., made unsuitable recommendations to a married couple that they purchase a Variable Universal Life (VUL) insurance policy on the husband’s life, and use the proceeds of a reverse mortgage to purchase a variable annuity and open a managed investment account. It was further alleged that when questioned about the VUL application by the insurance company Moniz resubmitted the form and made additions and changes without first informing the clients. According to FINRA’s allegations, Moniz’s conduct amounted to violations of FINRA Rule 2010 and NASD Conduct Rules 2310 and 2110.
FINRA Rule 2010 states: “A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.” The rule was adopted verbatim from its predecessor, NASD Rule 2110. Rule 2310, NASD’s Suitability rule, requires firms to make reasonable efforts to obtain certain information from the customer, and to have a reasonable grounds for believing that a recommendation is suitable for a customer based on the customer’s financial situation and needs.
According to a Sept. 26 article in the Boston Globe, Moniz, who worked as a broker for John Hancock for 35 years, denied wrongdoing. He said consumers were aware of the fees and the investments helped them pay for elderly care and protect their nest eggs.
“Those that we did were completely appropriate,” Moniz said. “We preserved assets, and we provided care and income.”
The Attorney General’s statement on the case said, “consumers should be aware that using funds from a reverse mortgage to invest in financial products like annuities is always risky. Variable life insurance policies and variable annuities may not be appropriate investments for older individuals because of steep surrender and withdrawal penalties. Before purchasing any financial product, consumers should always ask questions and make sure that they understand the investment risks, read any forms that they sign, and never sign blank forms.”
As part of the settlement, John Hancock will also provide personnel with additional training designed to prevent and detect this type of misconduct.