Cadaret Grant, the nation’s 34th-largest independent broker-dealer, consented to a $200,000 fine, further restitution to investors and a censure for the improper sale of variable annuities to elderly clients, FINRA announced.
From 2006 to 2008, one of Cadaret Grant’s registered reps sold 13 elderly clients -- all age 77 or older -- unsuitable death benefit riders to variable annuities, according to a FINRA ruling. The death benefit was only good through age 80, costing the clients an additional 25 basis points in fees for the life of policy, even though it no longer applied beyond age 81.
In four of the cases, the clients could not benefit in any way from the rider, the regulatory authority said.
An executive of the firm, Megan Grant, said the rep at the center of the case, who was not identified, had been fired. Grant said the company, which placed 34th in the most recent FP50 Survey of the nation’s largest independent broker-dealers, would have no further comment. Syracuse, N.Y.-based Cadaret has 1,000 registered reps at 525 branches.
As part of the FINRA action, Cadaret agreed to rescind the purchase of the policies in the case and to offer rebates of the original purchase price of the policies, plus interest and charges, to each of the customers still living.
FINRA found that the firm failed to heed red flags regarding the rep, which included several customer complaints on her Uniform Application for Securities Industry Registration, some of which related to annuity sales. More customers complained about her role in subsequent variable annuity sales after she joined Cadaret.
“Despite these complaints, the representative was never placed on heightened supervision and her VA transactions were never subject to greater supervisory review or scrutiny,” FINRA concluded. Neither the rep nor her supervisor were adequately trained in the sale of these insurance products, FINRA found. The lack of proper control systems at Cadaret extended to the rep’s use of personal emails, which were not saved.
The firm also agreed to a comprehensive review of its procedures and policies concerning the suitability of variable annuities.
Ann Marsh writes for Financial Planning.
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