Commonwealth case against Ohio National should be arbitrated, court rules

Broker-dealer's claim involves insurer's decision to stop paying trail commissions

Apr 8, 2019 @ 4:27 pm

By Mark Schoeff Jr.

A dispute between Commonwealth Financial Network and Ohio National Life Insurance Co. over the insurer's decision to end trail commissions on variable annuities will be decided in Finra arbitration.

The venue was settled in a decision by a Massachusetts federal judge, who ruled that an addendum to the selling agreement committed both firms to arbitration.

Ohio National argued that it and Ohio National Life Assurance Corp. could not be forced into the arbitration system run by the Financial Industry Regulatory Authority Inc. because the two entities are not Finra members.

Commonwealth, a broker-dealer regulated by Finra, filed its suit against Ohio National both in court and in Finra arbitration simultaneously, asking the court to compel arbitration. The action, which alleges a breach of contract, also was brought against Ohio National Equities Inc., which is a Finra member.

Judge Denise Casper held that the insurance operations of Ohio National also are subject to Finra arbitration.

"The court first concludes that the addendum contains a valid, enforceable arbitration agreement between the parties, not just those entities already bound to Finra arbitration under the Finra rules," Ms. Casper wrote in a decision last Wednesday.

An Ohio National spokeswoman declined to comment. A Commonwealth spokeswoman was not immediately available for comment.

Trying the case in Finra arbitration could help Commonwealth win because it has a home court advantage in that venue, according to Andrew Stoltmann, a Chicago securities attorney. Commonwealth has tried many disputes in the Finra system.

"They likely feel they know Finra arbitrators and how the Finra game is played — and that's really important," Mr. Stoltmann said. "There's a repeat-player bias, and Commonwealth is a repeat player."

Ohio National roiled the annuity community last fall, when it announced that it would terminate selling agreements with brokerages and stop paying brokers' trail commissions associated with certain Ohio National annuities.

Commonwealth filed its lawsuit and arbitration claims in November. The brokerage and financial adviser Margaret Benison, who also is a plaintiff in the case, allege Ohio National concocted an "unlawful scheme" to shed unprofitable variable annuities sold with a guaranteed minimum income benefit rider.


What do you think?

View comments

Recommended next


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print