Royal Alliance Associates, FSC Securities Corporation, SagePoint Financial, Woodbury Financial Services Censured & Fined
According to the Financial Industry Regulatory Authority (FINRA) on Tuesday, the regulator has sanctioned four firms, Royal Alliance Associates, Inc., FSC Securities Corporation, SagePoint Financial, Inc., Woodbury Financial Services, Inc. for failure to establish, maintain and enforce a supervisory system in regards to variable annuities.
According to the Letter of Acceptance, Waiver & Consent, between February 2014 and December 2015, Royal Alliance and between January 2013 and December 2014, FSC, SagePoint, and Woodbury allegedly failed to establish, maintain and enforce a supervisory system and written procedures designed to reasonably supervise representatives’ sale of multi-share class variable annuities and failed to provide training to their representatives and principals on the sale and supervision of multi-share class variable annuities.
In addition, between February 2014 and March 2016, Royal Alliance allegedly failed to reasonably supervise variable annuity exchanges in that it failed to implement a reasonable supervisory system and procedures to determine if any of its registered representatives had inappropriate rates of variable annuity exchanges.
Each of the firms has reportedly agreed to the following: Royal Alliance has been censured and fined $350,000. FSC and SagePoint were each censured and fined $200,000. Woodbury has been censured and fined $250,000. Additionally, according to FINRA, each of the four firms will be required to complete new certification regarding supervision of multi-class variable annuities: they shall review and revise, as necessary, the firm’s systems, policies and procedures and training.
Variable annuities are complex products that permit customers to choose among a variety of contract features and options. Due in part to the complexity of these products and the inherent risk of sales practice violations they present, FINRA issued Rule 2330 to require that firms enhance their supervisory systems, and provide more comprehensive and targeted protection to investors who purchase or exchange variable annuities.
Failure to Supervise
Brokers have a fiduciary duty to make investment recommendations that are consistent with the clients net worth, investment experience and objectives. Risk tolerance, age, and liquidity needs also need to be considered. Furthermore, brokers are prohibited from engaging in underhanded businesses practice, like churning or unauthorized trading, that violate securities laws and regulations.
When brokers abuse client accounts and conduct transactions that violate securities laws, the brokerage firm they are working with may be liable for investment losses. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
This information is publicly available on FINRA’s website and provided to you by The White Law Group. For a free consultation with a securities attorney, please call the offices at 888-637-5510.
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