Smaller brokerage firms and broker/dealers often fly under the radar when it comes to internal compliance and enforcement, despite the fact that many of these firms have serious arbitration and customer complaints lodged against them. Case in point: Woodbury Financial Services.
According to information listed in the BrokerCheck section of the Financial Industry Regulatory Authority (FINRA), in June 2009 the Vermont Securities Division charged and fined Woodbury Financial Services for violations involving supervisory failures. The incident in question concerned two Woodbury Financial agents who were alleged to have made unsuitable recommendations to clients regarding variable annuity contracts.
Earlier in 2009, Woodbury Financial was again sanctioned and fined by securities regulators. This time, the Arizona Corporation Commission fined Woodbury $250,000, as well as ordered the company to reimburse investors for the losses they suffered in a scam conducted by two former Woodbury Financial agents, Mayra Jeanette Angulo and Mark Islas of Tucson. The Commission ordered the duo to pay $914,317 in restitution and $150,000 in administrative penalties for defrauding at least 30 investors, some of whom were residents of Mexico.
According to the Commission, Angulo and Islas opened brokerage accounts and post office boxes for some customers and, in several instances, used their own post office boxes for clients or used the same post office box for several different customers. While distributing fictitious brokerage accounts statements, Angulo and Islas funneled money from their customers’ accounts to themselves and family members.
In the Arizona case, Woodbury Financial Services was forced to reimburse investors some $2 million.
Other serious marks on Woodbury’s CRD record include violations of the Missouri Securities Act of 2003 for allowing several brokers affiliated with the company to conduct business in the state of Missouri without having first attained proper licensing.
In terms of arbitration disputes, in 2000, FINRA (Case No. 00-05078) awarded an investor more than $150,000 in damages for her claim against Woodbury Financial on causes of action that included violation of the Georgia Securities Act; violations of the federal securities laws; breach of contract; common law fraud; breach of fiduciary duty; and negligence and gross negligence.
In another claim (Case No. 01-06167), this one settled in 2001, FINRA found Woodbury liable for more than $110,000 in a claim involving misrepresentation, breach of fiduciary duty, failure to supervise and unsuitability.
Woodbury Financial Services is a subsidiary of The Hartford Financial Services Group of Hartford, Conn. As an independent broker/dealer, Woodbury Financial offers life insurance, variable annuities, alternative investments, and brokerage services. The company has more than 1,850 independent representatives located throughout the United States.