FINRA has fined and suspended a financial advisor who systematically switched retired clients from low-cost index funds into high-fee variable annuities, generating excessive commissions while devastating retiree portfolios.
FINRA disciplinary action details
The Financial Industry Regulatory Authority (FINRA) found that the advisor moved 23 clients, ages 65 to 78, out of diversified index fund portfolios and into variable annuities with living benefit riders between 2022 and 2024. The switches generated over $1.2 million in commissions. Those same trades would have produced less than $85,000 in commissions had the clients remained in their original index fund positions.
Clients collectively lost approximately $840,000 through surrender charges and missed market gains. The variable annuities carried commissions of 6 to 8 percent, compared with typical index fund commissions of roughly 0.5 percent.
Violations and penalties
FINRA charged the advisor with violations of Rule 2111 (Suitability) and Rule 2010 (Standards of Commercial Honor and Equitable Principles of Trade). The regulator determined that the advisor failed to demonstrate a reasonable basis for recommending the annuity switches.
The advisor received a $275,000 fine, an 18-month suspension from associating with any FINRA member firm, and was ordered to pay $840,000 in restitution to affected clients. The firm that employed the advisor was also sanctioned for failing to supervise the transactions adequately.
Red flags retirees should recognize
We have seen this pattern repeatedly throughout our careers on Wall Street. An advisor suddenly pushes you out of a low-cost portfolio into a complex insurance product. The stated rationale usually involves “protection” or “guaranteed income.” The real motivation is a commission that dwarfs what the index fund generates for the advisor.
Watch for these warning signs: pressure to move quickly before a “special offer” expires, promises of guaranteed returns that seem too good to be true, and reluctance from the advisor to show a side-by-side cost comparison. If your advisor cannot clearly explain why a variable annuity suits your specific situation better than your current holdings, that conversation is a red flag.
How to file a FINRA arbitration claim
Investors who believe they were victims of unsuitable annuity switches can file a FINRA arbitration claim. The process begins with filing a statement of claim through the FINRA Dispute Resolution portal. Most investor claims qualify for FINRA’s streamlined arbitration process, which handles cases involving $100,000 or less.
FINRA arbitration does not require you to hire an attorney, but investors who work with experienced securities attorneys consistently recover higher amounts. Claims must generally be filed within six years of the transaction date. Evidence including account statements, suitability questionnaires, and correspondence with your advisor will strengthen your case.
Haselkorn & Thibaut fights for investor recovery
Haselkorn & Thibaut is a national securities law firm founded by former Wall Street defense attorneys. We bring insider knowledge of how firms operate from the inside, and we use that experience to fight aggressively for investors who have been wronged. Our track record includes a 98 percent success rate across thousands of cases, with over $520 million involved in securities matters.
With 95-plus years of combined experience, AV Preeminent ratings from Martindale-Hubbell (top 2 percent of attorneys), and Super Lawyers designations, our firm has the credentials and the determination to hold financial firms accountable. We maintain offices in Florida, New York, Arizona, Texas, and North Carolina to serve investors nationwide.
Contact Haselkorn & Thibaut today
If you suspect your advisor made unsuitable investment recommendations, contact us immediately for a free consultation. Time limits apply to investment recovery claims, and delays can jeopardize your ability to recover losses.
- Main Phone: 1-888-885-7162
- Visit our website for a free consultation
Haselkorn & Thibaut operates on a contingency basis — no recovery, no fee.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Past results do not guarantee future outcomes. Consult with a qualified attorney regarding your specific situation.
