A pair of registered representatives with Planmember Securities Corp. in Texas face the loss of their securities licenses and fines of $100,000 each for the improper sale of life settlement notes.
A pair of registered representatives with Planmember Securities Corp. could lose their securities licenses in Texas and face fines of $100,000 each for the improper sale of life settlement notes.
The brokers, Jimmy Wayne Freeman Jr. and Kris Bradford Rhoden, are due to appear at the State Office of Administrative Hearings on Aug. 4 for a proceeding that will determine whether the men lose their securities registrations and have to pay the fines, according to the Texas State Securities Board.
State regulators claim that between June 2008 and February 2009, Mr. Freeman and Mr. Rhoden sold note agreements that were supposedly backed by life insurance policies and guaranteed a 10% simple-interest return for five years.
The men allegedly also sold a so-called Immediate Income Investment Plan, which involved a five-year note that was purportedly backed by life insurance policies, plus a five-year, fixed biweekly income account.
Both products were issued by National Life Settlements LLC, a now-defunct firm that was shut down by Texas securities cops in 2009 after selling $30 million in unregistered investments — phony promissory notes that were supposedly backed by life settlements — to teachers and state retirees.
Mr. Freeman and Mr. Rhoden allegedly failed to comply with Planmember's supervisory procedures, which barred private-securities transactions and required them to get prior written approval from the broker-dealer before participating in a securities transaction outside of the regular course of business, Texas securities regulators claim.
The men also failed to get permission from Planmember to perform an outside business activity before receiving an undisclosed amount in commissions for selling away, according to the brokers' hearing notices. State regulators also charge that when Mr. Freeman and Mr. Rhoden sold the life settlement notes, they told Planmember on their compliance questionnaire that they did not offer or sell such products.
Finally, the men failed to make a timely update of their U-4 forms to show that they were marketing the life settlement notes, and both used their personal e-mail accounts to communicate with Planmember clients about the investments, according to the hearing notices.
Mr. Freeman and Mr. Rhoden have 30 days to contest the Texas State Securities Board's allegations, said Bob Elder, a spokesman for the regulatory department.
The men did not immediately return calls seeking comments, and an e-mail to their firm was returned as undeliverable. Planmember spokeswoman Barbara Davis did not immediately return a call for comment.
