Finra fines Ameritas, broker over ‘unsuitable’ variable universal life policies

The Financial Industry Regulatory Authority Inc. has slapped Ameritas Investment Corp. with a fine after one of its brokers encouraged clients to buy unsuitable variable universal life insurance policies to help pay for college costs and retirement.

Finra of New York and Washington fined Ameritas of Lincoln, Neb., $100,000 for failure to supervise broker Nancy Ziering and for advertising violations that were related to her financial plans.

She was also fined $60,000 and suspended for nine months.

According to Finra, Ms. Ziering drafted misleading financial plans for more than 220 clients whom she had recruited through Madison Financial Aid Consultants LLC, her Chatham, N.J., college-planning firm, between October 2003 and December 2005.

Through that firm, she gave seminars on college planning and would then meet with parents to discuss funding, Finra said.

However, the plans that Ms. Ziering proposed were complicated and required clients to stick with the plans over the course of 20 years.

Although the financial plans were pitched as a way to save for college and retirement, they almost always required a purchase of a VUL policy issued by an Ameritas affiliate using money from either a mortgage-refinancing or home equity loan, according to Finra.

More than 90 clients in these financial plans purchased at least one Ameritas VUL policy, Finra said.

Six of Ms. Ziering’s recommendations were unsuitable, Finra said.

In one example, a client told Ms. Ziering that she and her husband had about $80,000 in debt and that they were spending more money on expenses than they were generating in income.

The broker recommended a VUL policy, requiring the client to pour money into large annual premium payments, according to Finra.

Prior to Finra’s enforcement action, Ameritas rescinded the six transactions and refunded the clients’ money.

Neither the company nor Ms. Ziering admitted or denied the charges.

She and Ameritas have crossed paths in the courtroom before.

Last December, the insurer took Ms. Ziering to court for breach of contract, alleging that she had made unsuitable recommendations to 14 customers, requiring Ameritas to pay up $169,915 in returned premiums, according to court documents. However, she was contractually bound to reimburse the carrier for those expenses, which she allegedly refused to pay.

In April this year, Ameritas voluntarily dismissed the claim.

Ironically, Ms. Ziering has been quoted in a number of articles on paying for college.

“Going into debt to pay for an education has to be done with a very specific plan to get out of it,” she was quoted as saying in a 2006 Money magazine article, “Take Control of College Debt.”