Hornor Townsend & Kent – Failure to Supervise Variable Annuity Share Class Recommendations
According to the Financial Industry Regulatory Authority, Hornor Townsend & Kent in Horsham, PA has reportedly been censured and fined $275,000 for supervisory issues.
Hornor Townsend & Kent reportedly sold at least 15,815 VA contracts to its customers. Approximately 7,398 (46.7%) of these wereL-share contracts.
According to FINRA, the firm allegedly failed to implement a supervisory system and procedures reasonably designed to ensure the suitability or multi-share class Variable Annuity sales, including L-share contracts.
FINRA stated that the firm purportedly sold Variable Annuity contracts with the option of different share classes, including B-share contracts and L-share contracts.
B-share contracts are the most common share class sold in the industry and typically have a seven-year surrender period.
L-share contracts provide a shorter surrender period of three to four years. Insurance companies design L-share contracts so that customers pay a higher fee in exchange for the increased liquidity provided by the shorter surrender period. The fees associated with an L-share contract are typically between35 and 50 basis points higher annually than most B-share contracts. L-share contracts are designed for investors who want the option to surrender the L-share contract sooner than a B-share contract.
According to the terms established by the insurance company issuers, if a purchaser chooses not to surrender an L-share contract during the surrender period, the purchaser continues to pay a higher annual fee for the life of the contract, unless the contract provides for a “persistency credit.”
FINRA said the firm allegedly failed to implement an adequate supervisory system and written supervisory procedures (“WSPs”) related to the sales of multi-share class Variable Annuities.
Hornor Townsend & Kent’s WSPs purportedly failed to provide registered representatives and principals guidance and suitability considerations for sales of different VA share classes. The firm reportedly did not provide training to registered representatives on the features of the various share classes and the associated fees and surrender charges. Further, they allegedly did not provide them with adequate information to compare share classes to make suitability determinations, according to the regulator.
Failure to Supervise Private Securities Transactions
During the Relevant Period, the firm allegedly failed to adequately supervise the private securities transactions of its representatives who were dually registered as investment advisors with third-party advisory firms. According to FINRA, the Firm’s WSPs reportedly did not address the supervision of transactions that representatives executed through third-party investment advisors. As a result, Hornor Townsend & Kent did not adequately supervise these activities.
Investigating Potential Claims
The White Law Group is investigating the liability that Hornor Townsend & Kent may have for losses sustained by their clients. Brokerage firms are required to adequately supervise their agents to ensure they are complying with FINRA rules. If it is determined that the broker dealer failed to supervise their agents, they can be held responsible for losses in a FINRA arbitration claim.
Are you concerned about your investment losses with Hornor Townsend & Kent? The attorneys at The White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.
The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, please visit www.whitesecuritieslaw.com.