By Mack Bekeza

On July 2016, FINRA discovered that Travis Wetzel, a former broker who was originally barred from the industry in 2013, had been making fraudulent annuity withdrawal requests for an 89-year old’s Variable Annuity with Prudential. Once Prudential got wind of this, it immediately investigated the situation and discovered that the withdrawals were being made from an account in the broker’s wife’s maiden name! Overall, there were a total of 114 withdrawals made to this account between July 2010 through September 2012. Unfortunately for Prudential, even though it responded promptly and reimbursed the 89-year old, it was fined $950,000 by FINRA for failing to spot this while the withdrawals were being made.

Even though this story seems to be very unfortunate for both the 89-year old and Prudential, things like this happen more frequently than most people would think. For instance, MetLife was fined $25 million dollars for similar reasons. And, on top of that, LPL has paid over $12 million in fines and restitution for failing to supervise fraud in variable annuities, non-traded REITS, and even certain ETFs.

Since variable annuities are complex products that are mostly sold to the elderly, FINRA places a very high level of scrutiny on possible fraudulent activity. And, it can be quite a task for brokers to spot these transactions since they process millions of transactions on a daily basis. So, being able to spot fraudulent activity the minute it happens can be nearly impossible. In fact, it can take up to a couple of years to find out what exactly happened!

Is there anything the client can do to avoid these mishaps? Fortunately, yes, there is! Individuals can hire a financial advisor, such as Castle Rock Investment Company, that operates as a fiduciary to help them make the right choices and not get sucked in by a dishonest broker. Another thing that a client can do is look up their broker or investment advisor through FINRA’s Broker-Check website to see if they have had previous client complaints. Although most financial professionals are honest people, it is important that individuals seeking financial advice do their homework to see if they are walking into a trap.

© 2016 Castle Rock Investment Company. All rights reserved. Please share your insights with us at mack@castlerockinvesting.com or via phone at 303-719-7523