Annuity Investment Fraud 

Annuity Investment Fraud 

According to an article in Financial Planning this week, we are in a “historic boom for annuities,” and regulators are signaling to brokers and financial advisors that these products are just like any other investment when it comes to disclosing conflicts of interest.  

According to a lawsuit filed by the Securities Exchange Commission (SEC) on March 17, a registered investment advisor in Fallmouth, Massachusetts and his firm allegedly failed to disclose that the annuities they put clients into came with a large 7%-8% commission. The advisor also allegedly made false statements in applications for the insurance products and made false statements to at least one client regarding his commission compensation. 

According to the SEC’s complaint, between at least 2014 and 2022, the advisor allegedly engaged in a pattern of deception designed to steer his investment advisory clients to certain insurance products over other investment options, while purportedly concealing his financial motive to do so.  

The advisor allegedly switched clients out of annuity contracts he had previously sold them into new annuity contracts without adequately disclosing his financial incentive to recommend these switches, including the hefty, up-front commissions he received from the insurance company and other third parties. 

From 2014 to 2022, the advisor reportedly generated at least $9,340,302 in commissions from the sale of 580 annuities to his investment advisory clients. 

Annuity investment fraud occurs when someone is misled or deceived into purchasing an annuity that is not suitable for their financial needs, goals, or risk tolerance. Your broker may use high-pressure sales tactics or make false promises to convince individuals to invest in an annuity that is not appropriate for them. 

Annuities are complex investment products that can be difficult to understand, and they often come with high fees and expenses. Unfortunately, some unscrupulous financial advisors or insurance agents may use this complexity to their advantage and engage in fraudulent behavior. 

Types of Annuity Investment Fraud  

One common type of annuity investment fraud involves misrepresenting or withholding important information about the investment. For example, your broker may fail to disclose that the annuity comes with high fees, or they may misrepresent the expected rate of return on the investment. 

Another common tactic used in annuity investment fraud is to misrepresent or conceal important information about the surrender charges associated with the investment. Surrender charges are fees that investors must pay if they withdraw their money from the investment before a specified period, which is typically several years, has elapsed. Your broker may downplay the severity of these charges or fail to disclose them altogether, leaving you with a significant financial burden if they need to withdraw their money early. 

In some cases, your broker may convince you to liquidate other investments to purchase the variable annuity, even though this may not be in your best interest. 

What is  Annuity Switching? 

Annuity switching is another type of annuity investment fraud. 

Annuity switching involves an investor transferring assets from one annuity contract to another, typically with the same insurance company, in order to take advantage of certain benefits or features of the new contract. However, this type of switching can also result in higher fees, reduced benefits, and other costs that may not be in the investor’s best interest. 

If your financial advisor or broker engages in annuity switching without fully disclosing the costs and risks involved, or if they make false or misleading statements about the benefits or risks of the new contract, then this could be considered investment fraud. Additionally, if the advisor or broker receives excessive commissions or other incentives for recommending the switch, this may also be considered fraudulent behavior. 

Investors should be cautious of any financial advisor or broker who recommends annuity switching without providing full disclosure and transparency about the costs, benefits, and risks involved. It’s important to conduct your own research and seek advice from independent sources before making any investment decisions. 

FINRA Arbitration Attorneys for Securities Disputes 

When disputes arise between investors and securities firms or brokers, they may be required to resolve their differences through FINRA arbitration. FINRA arbitration is a process in which an impartial arbitrator or panel of arbitrators is appointed to hear the dispute and render a decision. 

A FINRA arbitration attorney can help you navigate the arbitration process and represent your interests throughout the proceedings. This can include preparing and filing the initial claim, conducting discovery, presenting evidence and arguments at the hearing, and appealing the decision if necessary. 

In addition to their knowledge of FINRA rules and procedures, FINRA arbitration attorneys at the White Law Group also have experience in securities law and litigation. They can provide valuable guidance to clients on the strengths and weaknesses of their case, the likelihood of success, and the potential risks and rewards of pursuing arbitration. 

If you suspect that you have been defrauded by your broker, it’s important to speak with a securities attorney as soon as possible. Securities fraud claims can be complex, and an experienced FINRA attorney can help you navigate the legal system and pursue the best possible outcome for your case.  

For a free consultation with a securities attorney, please call the White Law Group at 888-637-5510 for a free consultation. 

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. The firm is dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.     

For more information on The White Law Group, and its representation of investors, please visit WhiteSecuritiesLaw.com.