Finra arbitrators awarded an investor more than $1 million for what she alleges was a Wilbank Securities Inc. broker's misleading sales pitch about a variable annuity that over-promised and under-delivered.
Grace S. Huitt won a total of $1,073,440 — with $536,720 coming in compensatory damages and $536,720 in punitive damages — against Wilbanks in the case decided by a three-person all-public Financial Industry Regulatory Authority Inc. arbitration panel. The award was signed Thursday.
Ms. Huitt alleged fraud, breach of contract, negligent supervision and breach of fiduciary duty related to her investment in an ING Landmark Variable Annuity, according to the award document.
She made the purchase at a Wilbanks Securities Grand Junction, Colo., branch in 2008 and sold the annuity in 2012. When she bought it, she was promised a guaranteed 7% compounded annual return, according to her lawyer, Marc Fitapelli, a partner at the law firm Fitapelli Kurta.
The difference between her promised return and what she received was reflected in the compensatory damages, Mr. Fitapelli said. He attributed the punitive damages, which were levied under Oklahoma law, to Wilbanks Securities' "pattern of harming a group of people" beyond his client. He said that eight other investors documented similar problems.
Aaron B. Wilbanks, president and chief executive of Wilbanks Securities Inc., did not respond to a voice mail left at the firm's Oklahoma City, Okla., headquarters. The firm has three disclosures on its BrokerCheck profile, two of which involved regulatory violations and one of which was Ms. Huitt's arbitration proceeding.
The arbitration award says that Wilbanks Securities denied Ms. Huitt's allegations and filed a counterclaim, alleging that Ms. Huitt was too late in pursuing arbitration. She filed her claim on Jan. 22, 2016. The Finra arbitrators denied the counterclaim and gave Ms. Huitt less than she originally sought, which were compensatory damages of $882,612.21 and punitive damages of $1,765,224.41.
Variable annuity sales totaled $102.1 billion in 2016, a 21.6% drop from their 2015 level of $130.4 billion, according to the Insured Retirement Institute.
Advocates for annuities -- fixed, fixed index and variable -- say that they are a critical component of retirement security because they provide a guaranteed income stream.
But Mr. Fitapelli said that his client's case illustrates the downside of variable annuities, which have a reputation for being complex.
"Variable annuities are the worst thing in the world," he said. "They're confusing. The fees are too high, and they shouldn't be sold. People don't understand them."