New York Securities Fraud Lawyers Blog
Beware of alternative investments. A Letter of Acceptance, Waiver and Consent (AWC) was recently accepted by the Financial Industry Regulatory Authority’s (FINRA’s) Department of Enforcement from Robert Michael Diehl. Mr. Diehl was accused of bypassing firm policy in order to sell equity indexed annuities (“EIAs”) while a registered representative of Park Avenue Securities LLC. Specifically, Mr. Diehl was accused of violating FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade) and 3270 (Outside Business Activities of Registered Persons).
Equity indexed annuities are alternatives to fixed rate or variable rate annuities. They are characterized by yielding interest returns at least partially based on equity indexes, such as the S&P 500, rather than mutual funds that are used in variable annuities. They are generally considered complex investments that typically yield high commissions to the selling brokers and high penalties to investors for early termination.
According to the AWC, between September and October 2014, Mr. Diehl sold EIAs to two customers. The AWC detailed that according to the firm’s compliance manual, Mr. Diehl was required to have the customers complete a non-brokerage account application for the EIAs sales, provide the customers with an Explanation of Investment form for EIAs, and submit these completed forms to his supervisor for review.
It was alleged that Mr. Diehl did not submit the applications through Park Avenue Securities LLC as required by the firm’s policies, and instead sent them directly to the EIA issuer. The AWC stated that Mr. Diehl neither informed his firm of the sales nor received permission from his firm for these sales.
Mr. Diehl was ultimately suspended from associating with any FINRA member for 45 days and was imposed a $5,000 fine. According to FINRA’s BrokerCheck report, Mr. Diehl has no customer disputes, but he was previously discharged from MML Investors Services, LLC in 2013 over alleged involvement in EIA sales when the firm did not permit such transactions. Firms are required to supervise their licensed brokers and financial advisors to ensure that they do not cause violations of the securities laws and industry rules, as well as remain in compliance with the firm’s policies and procedures. Firms may be found liable for failure to supervise their employees, if the broker’s customers suffered damages as a result of investments improperly or unsuitably sold to them.
Malecki Law has successfully brought many securities actions on behalf of investors who suffered losses as a result of unscrupulous actions taken in their securities accounts. If you believe you have suffered losses as a result of questionable securities recommended to you, or questionable actions taken in your securities account, please contact us immediately for a confidential consultation.