SEC charges Former LPL Brokers

Former LPL Brokers allegedly targeted Federal Employees nearing retirement

According to a press announcement Monday, the  Securities and Exchange Commission has charged four former LPL brokers with allegedly fraudulently inducing federal employees to roll over holdings from their federal Thrift Savings Plan retirement accounts into higher-fee, variable annuity products.

The four Atlanta area brokers charged are Christopher Laws, Jonathan Cooke, Danny Hood and Brandon Long. According to Investment News, they were registered with LPL Financial and affiliated with Federal Employee Benefits Counselors.

The SEC charges that it was through Federal Employee Benefits Counselors (FEBC) that the brokers targeted federal employees who had sizable funds invested in the Thrift Savings Plan and were nearing retirement.

According to the SEC, the brokers sold approximately 200 variable annuities with a total face value of approximately $40 million to federal employees, who used rollover money from their plans to fund the purchases. The brokers collectively earned approximately $1.7 million in commissions on these sales.

The complaint alleges that the brokers misled investors concerning significant details about the variable annuity investments they recommended, including the associated fees and guaranteed investment returns. In addition, the SEC charged that the brokers fostered the misleading impression that they were in some way affiliated with or approved by the federal government.

In some instances, the SEC charged, investors were led to believe that their funds would be invested in a product that was offered, vetted or specifically selected by the savings plan. Moreover, the SEC charged that the brokers allegedly sent investors incomplete or modified transaction forms, as well as written materials they devised, that obscured that the variable annuity was privately issued, had no connection to the savings plan and would be processed through a brokerage firm with which the brokers were associated.

The SEC said it seeks disgorgement of the brokers’ “ill-gotten gains” plus interest and penalties and permanent injunctions.

Variable annuities are extremely high commission products, often paying the financial advisor a more than 4% upfront fee when the annuity is purchased.

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This information, which is publicly available on FINRA’s website has been provided by The White Law Group.

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