Massachusetts securities regulators have charged Royal Alliance Associates with failure to supervise a broker who recommended unsuitable investments to a couple, which ultimately cost the investors nearly $60,000.
The broker, Stephen F. Davis of Barrington, R.I., also has been charged with breaching his fiduciary duty, according to an administrative complaint filed by the state's securities division. The complaint charges that Mr. Davis took over the account of the two investors after their previous investment adviser retired, and in 2015 advised the couple to exchange an annuity three years before its expiration for another annuity with a much lower interest rate.
The complaint details how Mr. Davis' failure to file paperwork for the exchange in a timely manner led to the couple being charged more than $15,000 in penalties, while the broker received more than $17,000 in commissions. Regulators also said the exchange resulted in a further cost to the couple of more than $43,000 in lost interest.
"Royal Alliance did not enforce its own internal policies and procedures, which require an agent to demonstrate an economic justification for recommending that a client switch from one product to another," the state said in a release, which also stated that the Secretary of the Commonwealth is seeking an administrative fine and an order requiring the respondents to disgorge profits related to the alleged wrongdoing, and to make restitution to compensate the investors. Sanctions and censure are also being sought, the release stated.