After a nine-day trial, a jury in the Northern District of Georgia on Monday ruled in favor of the Securities and Exchange Commission against a former registered representative of LPL Financial, Jonathan Dax Cooke, who was charged in 2017 with falsely portraying himself and his company as counselors hired by the federal government to educate federal employees about their retirement benefits.
That led to fraudulently inducing federal employees to roll over significant funds from their federal retirement accounts into higher-fee, variable annuity products, according to the SEC.
Cooke was registered with LPL in Alpharetta, Georgia, a suburb of Atlanta, from 2009 to 2014, according to his BrokerCheck profile. From March 2012 to November 2014, Cooke and three other brokers, using a business entity called Federal Employee Benefits Counselors, targeted federal employees nearing retirement with sizable funds invested in the federal Thrift Savings Plan, the SEC's complaint said.
According to the SEC, the brokers sold approximately 200 variable annuities with a total face value of approximately $40 million to federal employees, who used funds rolled over from their Thrift Savings Plan accounts to fund their purchases. The brokers collectively earned approximately $1.7 million in commissions on these sales.
LPL discharged, meaning fired, Cooke in 2014, citing "concerns regarding business practices, including communications with customers," according to his BrokerCheck profile. In Cooke's comment in response, the broker said that he "did nothing improper and was terminated due to his notice to voluntarily resign."
Securities regulators for years have cited retirement plan rollovers and potential conflicts of interest on the part of advisers as causes for concern. It's not clear what penalty Cooke faces after the jury decision.
“We are pleased with the jury’s verdict holding former registered representative Jonathan Dax Cooke and the entity he co-founded, Keystone Capital Partners, known as Federal Employee Benefits Counselors, liable for fraudulently selling variable annuities to hundreds of federal employees who were at or near retirement age," Gurbir S. Grewal, the director of the SEC's division of enforcement, said in a statement Tuesday.
An attorney for Cooke, Stephen Councill, didn't return a call Thursday morning to comment. A spokesperson for LPL did not return messages seeking comment.
The SEC's 2017 complaint alleged that Cooke and other brokers misled investors concerning significant details about the recommended variable annuity investment, including the associated fees and guaranteed investment returns.
The brokers fostered the misleading impression that they were in some way affiliated with or approved by the federal government, according to the SEC complaint. In some instances, investors were led to believe that their funds would be invested in a product that was offered, vetted or specifically selected by the Thrift Savings Plan.
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