Despite a costly $570,000 arbitration loss this month, PFS Investments Inc. this year has batted away a handful of similar arbitrations stemming from brokers' alleged mismanagement of public pension plans in Florida.
PFS Investments and some of its representatives have faced or will face almost two dozen of such Financial Industry Regulatory Authority Inc. claims, according to the November quarterly report from its parent company, Primerica Inc.
The investors filing the claims are seeking “unspecified damages arising from the allegations that the representatives improperly recommended that the claimants transfer their retirement benefits from the Florida Retirement System's defined-benefit plan to its defined-contribution plan,” according to the Primerica filing with the Securities and Exchange Commission. “The arbitrations have been brought by a law firm in [Miami] that engaged in efforts to solicit public employees to bring these claims against us.”
PFS Investments, with 16,600 independent registered reps, is one of the sales arms for Primerica, a giant distributor of insurance and investment products spun off from Citigroup Inc. in April 2010.
When it comes to the variety and choice of products, PFS Investments' reps have a much more limited scope than independent broker-dealers such as LPL Financial LLC or Raymond James Financial Services Inc. PFS Investment reps primarily sell mutual funds from five asset managers: American Century Investments, Franklin Templeton Investments, Invesco , Legg Mason Inc. and Pioneer Investments.
In the $570,000 award from Dec. 2, four claimants alleged that the causes of action related to their “irrevocable election to give up their guaranteed, publicly funded defined-benefit pension, the 'FRS Pension Plan,' to take a lump sum payment and convert their retirement plans to defined-contribution investment plans, the 'FRS Investment Plan.'”
The arbitration panel's award fell far short of the claimants' original request of almost $4.7 million.
One of their lawyers, Lawrence Kellogg, didn't return phone calls this week seeking comment about this claim or other similar complaints in the works against PFS Investments.
PFS Investments has been winning these disputes, according to the Primerica quarterly report.
“We have completed three arbitrations. In two arbitrations, the public employee received no monetary award,” according to the November filing.
“In a third arbitration, the panel dismissed the claims against our representative but awarded a monetary judgment that was individually immaterial to the company and considerably less than the amount sought by the claimant,” according to the filing. “We filed a motion to vacate the award, which was granted in October 2013.”
PFS Investments also faces lawsuits in Florida state court over the pension plan dispute, according to the company filing.
“Primerica has been vigorously and successfully defending the Florida Retirement System claims,” said company spokeswoman Kathryn Kieser.
“The State of Florida provides employees with a wealth of information to make personal plan choices based on their individual needs,” she said. “None of the claimants are Primerica investment clients, and no compensation was paid to our representatives relating to FRS plan choices.”