Massachusetts' top securities cop has charged Securities America Inc. with failure to supervise a broker who allegedly used deceptive advertising on his radio show that targeted senior citizens.
The regulator accused the firm, a subsidiary of Ladenburg Thalmann Financial Services Inc. with more than 2,000 brokers, of approving ads from a broker who “exploited the dangers of Alzheimer's disease in order to gain access to senior clients,” according to a news release from the office of William Galvin, secretary of the commonwealth.
Mr. Galvin has filed a separate complaint against the broker, Barry Armstrong, the news release said. Mr. Armstrong and his firm, Armstrong Advisory Group, manage $400 million in client assets, according to its website.
The complaint against Securities America requests a censure, undisclosed fine and a requirement that the firm retain a compliance consultant.
Mr. Armstrong, who hosts a regular radio show that runs on several AM stations, ran ads that instructed listeners to call him for “medical and support” information about Alzheimer's disease in order to get their contact information and then attempt to sell financial advice, according to the complaint.
'BAIT AND SWITCH'
Mr. Armstrong “pulled a 'bait and switch,' falsely advertising one service to obtain contact information, and then switching it out for another — financial services,” the complaint said.
“Securities America's failure to raise a single question about the content of the Alzheimer's ads and the attendant mailing materials represents an utter failure that goes to the very purpose of a compliance function,” the secretary's office said in the news release. “Securities America failed to prevent or even flag glaringly unethical conduct.”
Securities America disagrees, according to spokeswoman Natalie Haley, who said in an emailed statement that the firm “will vigorously defend against the allegations brought.”
An attorney for Mr. Armstrong, Timothy O. Egan with Peabody & Arnold, also disagreed. He said there was no false advertising. Mr. Armstrong was sincere and his personal experience with Alzheimer's motivated him to provide information as well as financial advice, according to Mr. Armstrong.
“Motivated by his personal experiences, Mr. Armstrong has endeavored to provide the public with valuable information about the disease and sound financial strategies that families can consider to protect themselves in the event they become a direct or collateral victim of the disease,” he said. “This is precisely what the ad offers and what Mr. Armstrong provided.”
NO CUSTOMER COMPLAINTS
Mr. Egan added that the ad generated no customer complaints and it was “unclear what has prompted the secretary of state's office to pursue this matter.”
“Mr. Armstrong intends to vigorously defend his good name,” he said.
Regulators have been focused on advertising and marketing to seniors as part of several recent investor protection initiatives. The
Financial Industry Regulatory Authority Inc., for example, recently
launched a toll-free securities help line for seniors, and has said it is focusing on marketing, including senior designations, as part of its regulatory efforts.
Mr. Armstrong has five disclosure events on his Finra BrokerCheck record, including a termination from a previous broker-dealer and three customer disputes. Two of the disputes were settled for a smaller portion of what was requested and one was withdrawn. Mr. Armstrong disagreed with the allegations behind the termination and customer disputes, according to BrokerCheck.
