Class Action

Ponzi Schemes

Latest News

8:00am - 5:00pm EST

Office Hours Monday - Friday

(574) 722-6676

Call Us For Free Consultation




Beware of Annuity Exchanges!

Beware of Annuity Exchanges!

Beware of Annuity Exchanges

by Scott Starr

Annuities are some of the highest commission products available for an insurance agent or a stockbroker to sell.  Many times, annuities are more beneficial for the salesman than they are for the client.  That is because in addition to the hefty commissions the stockbroker or insurance agent earns for selling these investments, the annuities themselves frequently have very high expense ratios which come off the top before an owner receives any benefit.  Furthermore, annuities are typically extremely illiquid meaning that they are very difficult to get out of or cash in without paying a hefty penalty.  Because of these things, some insurance agents and stockbrokers have a tendency to sell annuities to investors who not only don’t need them, but worse cause the investor harm.

Because annuities pay such huge commissions to stockbrokers or insurance agents, some bad advisors or stockbrokers will convince their client to trade in, exchange, or switch the annuity the investor currently owns for a new and different annuity.  Many times, this is done for the purpose of enriching the bad stockbroker or insurance agent by giving him the opportunity to earn an additional commission.

Attached below is an article recently published by Law360 entitled “FINRA Sanctions Fifth Third 6M on Variable Annuity Claims,” authored by Ed Beeson.  Note that FINRA found that Fifth Third Securities Inc.’s stockbrokers and investment advisors were causing their customers to switch annuities “without a reasonable basis to believe these transactions were suitable for the customers.”  In other words, Fifth Third’s agents were enriching themselves at the expense of their clients.

Starr Austen & Miller has represented many clients who were sold bad and unsuitable annuities by unscrupulous insurance agents to stockbrokers.  Unfortunately, this conduct is not limited to Fifth Third.  If you and/or a loved one has experienced such an unfortunate turn of events, contact us for a free consultation to discuss whether you might have a case for broker or insurance agent misconduct.




FINRA Sanctions Fifth Third $6M On Variable Annuity Claims

by Ed Beeson of

The Financial Industry Regulatory Authority on Tuesday ordered Fifth Third Securities Inc. to pay $6 million to settle claims about the way it has run its retail variable annuities business, including complying with the terms of an earlier settlement with the regulator over similar issues.

According to the self-regulatory organization, Fifth Third representatives, among other things, recommended that customers exchange their variable annuities without a reasonable basis to believe these transactions were suitable for the customers. They also allegedly failed to give customers an accurate picture of the costs and benefits of such exchanges.

“The inaccurate information made the proposed VA exchanges appear more beneficial to customers than was the case,” FINRA officials wrote in a related settlement order.

FINRA also said the firm failed to adequately train its representatives on comparing the material features of one variable annuity to those of another. As a result, representatives often misstated and omitted key information about making a variable annuity exchange, particularly the fees customers would incur and the accrued benefits they would give up when making an exchange, FINRA said.

The problem with the variable annuity business was also extended to the firm’s principals, because they approved 92 percent of the variable annuity exchange applications even though they had no reasonable basis to do so, FINRA said.

FINRA officials said they sampled the firm’s variable annuity exchanges from 2013 and 2015 and found misstatements and omissions in about 77 percent of them.

Variable annuities are financial instruments sold to retirees and retirement savers, and their complexity and expense makes them a front-line interest to regulators like FINRA.

“FINRA remains vigilant in examining how member firms market variable annuities, which are complex products pitched to retirees and people saving for retirement,” Susan Schroeder, head of FINRA Enforcement, said in a statement. “Returning $2 million in restitution to harmed investors is a key part of FINRA’s investor protection mission.”

The other portion of Fifth Third’s sanction — $4 million — came in the form of a fine. The firm agreed to pay the penalties without admitting or denying wrongdoing.

Factoring into the firm’s sanction was Fifth Third’s previous sanction over its variable annuity business. In April 2009, it agreed to pay a $1.75 million fine, plus restitution, and hire an independent consultant to help clean up its variable annuity business. That enforcement action also alleged that Fifth Third representatives made unsuitable recommendations to persuade customers to switch their variable annuities.

As part of the enforcement action, the independent consultant said Fifth Third should take additional steps to supervise exchanges of variable annuities, but it did not until four years after the deadline to do so had passed, FINRA said.

Between 2013 and 2015, Fifth Third sold at least $165.7 million of variable annuities, constituting more than 1,400 exchanges, according to FINRA. This earned the firm around $8.3 million in gross dealer commissions, the regulator said. Last year, the firm earned about $4.5 million in revenue from variable annuity sales out of $219.3 million in revenue last year.

A representative of Fifth Third said the variable annuity business is not a big one for the bank, but said it is “committed to full compliance.”

“Settling this matter puts it behind us and we can move forward. The [settlement] resolves both an enforcement investigation as well as open points from a prior order,” the spokesman said.

Fifth Third is represented by Gerald Russello of Sidley Austin LLP.

FINRA is represented by Thomas Kuczajda of the Department of Enforcement.

The case is Re: Fifth Third Securities, case number 628, before the Financial Industry Regulatory Authority.


The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.