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Five Broker/Dealers Fined By FINRA For Supervisory Failures

Five broker/dealers, all dealing in variable annuities, mutual funds and other types of securities, are facing fines of $1.7 million by the Financial Industry Regulatory Authority (FINRA) for failing to properly supervise sales to customers, many of whom were elderly and retirees. 

The five firms, along with their respective fines, include:

  • McDonald Investments (now KeyBanc Capital Markets, Inc.) – $425,000
  • IFMG Securities – $450,000
  • Wells Fargo Investments, LLC – $275,000
  • PNC Investments – $250,000
  • WM Financial Services, Inc. (now Chase Investment Services Corp.) – $250,000

According to FINRA, brokers at each of the firms operated out of branches of affiliated banks, selling the investments to bank customers. The brokerage customers were referred by bank personnel, and sales of these financial products represented a significant portion of each firm’s business.

 “Today’s actions underscore the need for firms operating bank branches to have effective systems and procedures in place to monitor sales of variable annuities, mutual funds, and UITs,” said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement, in a press statement. 

“Bank broker-dealers have access to a broad customer base through their retail bank branches. Proper care must be taken to appropriately supervise sales to those customers, particularly the elderly who can be unfamiliar with securities products as they seek alternatives to certificates of deposit and other bank offerings.”

McDonald Investments also was charged with selling variable annuities with enhanced death benefit riders to 25 customers aged 78 or older. The customers were either too old to be eligible for the rider or very close to the ineligible age and would have received little or no benefit from the rider despite paying higher fees for it over the life of the annuity. 

The customers will be given the opportunity to get their money back plus interest, according to FINRA.

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