Variable and Fixed Annuity Unsuitable and Unnecessary Switch (Exchange) FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Jan David Henderson (CRD #2401845, Registered Rep., Midway, Utah) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Henderson consented to the described sanction and to the entry of findings that he engaged in a pattern of unsuitable variable annuity switch transactions in which he executed unsuitable variable annuity switches involving customers. The findings stated that Henderson would switch customers from their existing fixed and/or variable annuities into a specific variable annuity, thereby improperly earning additional commissions at the expense of customers who paid substantial surrender fees; for these switches, customers paid approximately $208,000 in surrender penalties and Henderson received approximately $380,235 in commissions. The findings also stated that Henderson executed these variable annuity replacement transactions without regard to the substantial surrender charges imposed or the extension of the surrender periods for his customers. The findings also included that Henderson utilized a “one-size-fits-all” investment strategy for the customers, which was not suitable for his diverse client base. FINRA found that Henderson failed to research and understand the salient features of the variable annuity, such as the other investment options and other riders available to his customers, and only selected and discussed with his customers the same single investment option and the same single rider for all customers; in fact, Henderson, before even selling the variable annuity to any of his customers, had already predetermined that he would sell his customers the same single investment option and the same single rider, based largely, if not exclusively, on representations a wholesaler made to him without conducting any of his own independent research or analysis. FINRA also found that Henderson marketed the variable annuity to his customers based on the rider’s purported benefits; however, Henderson failed to correctly and accurately complete the variable annuity paperwork, which resulted in some of his customers not receiving the promised protection of a rider that he recommended at the time of the sale, thereby causing his member firm’s books and records to be inaccurate. (FINRA Case #2009019513901).