Massachusetts regulators say a broker-dealer based in San Antonio must pay $100,000 fine and offer restitution to four senior clients who were sold variable annuities and market-linked CDs at community banks and credit unions.
The BD, Investment Professionals Inc. (IPI), admitted to the facts set out in the order, according to the office of Commonwealth Secretary William Galvin.
In one case, a senior client in the final stage of terminal cancer had almost all of her assets put in a variable annuity, “leaving her without access to liquid funds,” the regulators say.
“This case highlights the dangers of aggressive sales culture that leaves older customers exposed to pressure to buy unsuitable investments,” explained Galvin in a statement. “This is especially true when the broker-dealer is operating out of a community bank.”
As part of the agreement, IPI must hire an independent compliance consultant to review its policies governing supervision of their Massachusetts-registered financial consultants and the sales of securities to persons over 65, as well as its compliance with Financial Industry Regulatory Authority rules on networking arrangements, noncash compensation, and gifts and gratuities.
Bay State Network
In Massachusetts, the BD has been working with Eastern Bank of Boston, Mutual Bank of Brockton, East Boston Savings Bank, Edgartown National Bank, The Cooperative Bank of Roslindale and Homefield Credit Union of North Grafton.
From early 2014 to mid 2016, the top 10 IPI representatives in these banks received more than 2,200 referrals, about 45% of which involved clients 65 and older. Eight of the 10 are employees of Eastern Bank.
Over the past three years or so, IPI organized “at least five aggressive sales contests, all of which ran counter to the firm’s own policies and procedures,” the regulators said in November, when they first took action against the BD.
In addition, the securities staff found that the broker-dealer “failed to supervise its representatives by promoting prohibited sales contests,” which resulted in sales of “unsuitable products” – such as market-linked CDs and annuities – by “at least two IPI agents working out of Eastern Bank.”
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