Finra on to B-Ds that sold VAs with hedge funds

Dec 9, 2012 @ 12:01 am

By Bruce Kelly

Finra is investigating half a dozen independent broker-dealers that sold variable annuities with subaccounts invested in hedge funds, resulting in $18 million in client losses during the credit crisis.

H. Naill Falls Jr., a plaintiff's attorney suing the broker-dealers, said that the Financial Industry Regulatory Authority Inc. contacted him a year ago about the sale of the product, a variable annuity issued by Sun Life Financial Inc.

The two hedge funds were the Foresee Strategies Insurance Fund and the Foresee Strategies 3(c)(1) Insurance Fund LP, which were related to a group called the SALI Multi-Series Fund LP, Mr. Falls said.


The broker-dealers that have faced Finra arbitration complaints from investors regarding the Sun Life annuities include FSC Securities Corp., Geneos Wealth Management Inc., Lincoln Financial Network, National Planning Corp. and SagePoint Financial Inc., Mr. Falls said.

Another broker-dealer that sold the product has shut down.

Finra spokeswoman Michelle Ong said that the industry's self-regulator does not confirm investigations.

Tom Nieman, chief financial officer of SALI Fund Services, declined to comment.

A Finra arbitration panel issued a $284,000 award last month to a SagePoint client who filed a claim against the firm last year alleging unsuitability, common-law fraud, breach of fiduciary duty and negligence.

“We had one adviser with one case and settled that six months ago,” said Russ Diachok, chief executive of Geneos, adding that he could not comment further.

Linda Skolnick, a spokeswoman for FSC and SagePoint, didn't return calls seeking comment.

Neither Lincoln Financial spokes-man Charlie Sahner nor Sun Life spokesman Tim Sone would comment.

Melissa Hernandez, spokeswoman for National Planning, said that the company doesn't comment on pending litigation. Twitter: @bdnewsguy


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