Massachusetts regulator William Galvin charges broker with high-pressure sales tactics that harmed elderly

Massachusetts charged a Texas-based brokerage firm Tuesday with running high-pressure sales contests at community banks that harmed senior citizens, including a customer with late-stage cancer who had nearly all her assets placed in a variable annuity.

The broker-dealer, San Antonio-based Investment Professionals, allegedly sold unsuitable investment products to older customers at its partner community banks in Massachusetts, according to an announcement from Massachusetts Secretary of State William Galvin. Among the banks were Eastern Bank of Boston, Mutual Bank of Brockton, East Boston Savings Bank, Edgartown National Bank, Cooperative Bank of Roslindale and Homefield Credit Union of North Grafton.

The firm’s aggressive sales culture allegedly rewarded sales volume at the expense of the suitability of the investments sold to seniors who had deposits at the banks. In one case, an Eastern Bank customer with terminal stage 4 cancer had nearly all of her assets placed in a variable annuity, leaving her without access to her savings, according to Mr. Galvin’s complaint.

“These sales gimmicks — especially as they relate to seniors — are an unacceptable practice which my office will not tolerate,” Mr. Galvin said when he announced the charges.

Investment Professionals is reviewing the complaint and will “actively engage” the state to answer and address this matter, said spokeswoman Amy Watson in an emailed statement.

Between 2013 and 2016 Investment Professionals ran at least five aggressive sales contests, all running counter to the firm’s own policies and procedures, according to the complaint. The high-pressure practices and failure to supervise led to unsuitable transactions to senior investors by at least two representatives of Investment Professionals working out of Eastern Bank, Mr. Galvin charged.

Eastern Bank is the broker-dealer’s largest partner in Massachusetts. The firm’s top 10 representatives for the bank received 2,208 customer referrals between January 2014 and June 2016, about 45% of whom were at least 65 years old.

“Aggressive sales contests run contrary to investor protection,” Mr. Galvin said. “Contests impacting senior investors on bank premises magnify the problems and concerns.”

Last month, Mr. Galvin charged Morgan Stanley with conducting an unethical, high-pressure, sales contest among its financial advisers to encourage clients to borrow money against their brokerage accounts. Persuading clients to take on debt was a violation of their fiduciary duty, according to Mr. Galvin. Morgan Stanley said the complaint was without merit.

His Boston-based office is seeking restitution for senior customers in the Investment Professionals case, as well as disgorgement of all fees and commissions obtained by the firm.

Investment Professionals manages more than $8.2 billion of assets and has partnered with more than 140 financial institutions across the U.S., according to the firm’s website.