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.