The Financial Industry Regulatory Authority Inc. on Friday barred a broker who had been forging customers' signatures on annuities documents, with the goal of using proceeds of the liquidations of annuities to purchase units of a registered index-linked annuity product and violating Regulation Best Interest, according to the Finra settlement.
The broker, Christopher Reynolds, had five years of experience in the securities industry and was registered at Pruco Securities from 2021 to 2023 and based in suburban Pittsburgh, according to his BrokerCheck report. Pruco "discharged," meaning fired, Reynolds in 2023 due to similar allegations as those in the Finra settlement.
"Variable annuities sales are growing in the rising interest rate environment, and we're seeing more instances of clients being switched out of annuities when it‘s in the brokers best interest and not the investors," said Scott Silver, a plaintiff's attorney. "That means classic cases of switching to generate fresh commissions for the advisor, and surrender charges and fees for the clients."
Reynolds "submitted non-genuine client signatures on multiple applications; with the intent to evade suitability review, failed to disclose transactions as replacements; and used his personal email address to transmit client documents," according to Pruco's allegations stated on Reynolds' BrokerCheck report.
Reynolds could not be reached Monday to comment. He agreed to the settlement with Finra without admitting or denying the regulator's findings in the matter.
Finra for years has monitored variable annuity misconduct, including advisors' switching or replacing annuities to generate fees and commissions.
"Plenty of financial advisors, particularly as rising interest rates could benefit clients, make smart and thorough decisions when switching variable annuities for clients," said one industry executive, who asked to speak privately about the matter. "But falsifying clients' signatures means the advisor will get barred from the industry. You can't get away with doing a VA switch if it's not in the clients' best interest."
According to Finra, between September 2021 and January 2023 Reynolds forged the signatures of three customers on 11 documents, including documents concerning withdrawals or surrenders of annuities in violation of Finra rules. Additionally, by forging customers' signatures, Reynolds caused Pruco to maintain inaccurate books and records, also a violation of industry rules.
Furthermore, between September 2021 and January 2023, Reynolds recommended that four customers make annuity withdrawals or surrenders and reinvest the proceeds in a registered index-linked annuity without having a reasonable basis to believe those transactions were in his customers' best interests, according to Finra, a violation of Regulation Best Interest.
Additionally, Reynolds used his personal email account and cell phone to exchange securities-related communications with firm customers, another violation of industry rules requiring appropriate record keeping of advisors’ communications with clients.
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