Massachusetts planner sanctioned for misleading client about $228k annuity purchase

The CFP Board has revoked the certification of a financial planner for allegedly misleading a client who entrusted him with hundreds of thousands of dollars, taken from the client's IRA, for a Medicaid-approved annuity.

In a November 22 press release, the CFP Board explained how Filippo Mastrocola, based in Everett, Massachusetts, redirected the majority of the more than $220,000 in funds entrusted to him by a client to a third-party account.

Drawing from an investigation by the Massachusetts Securities Division, the CFP Board said that starting in 2018, the client engaged Mastrocola for advice to help him and his wife qualify for Massachusetts Medicaid, otherwise known as MassHealth. After reviewing their assets, Mastrocola recommended that the client liquidate stocks from his IRA in order to purchase a Medicaid-compliant annuity.

"[Mastrocola] represented that he would use the proceeds of the Client’s IRA sales to purchase a Medicaid-compliant annuity on the client’s behalf," the CFP Board's order dated August 21 states. "[He] knew that it was not possible for a lawyer or designated agent to purchase an annuity on behalf of another person without that person ever having to sign any type of paperwork or attestations from the insurance company."

Following his advice, the client liquidated securities in their IRA in January 2020, withdrawing $228,000 to fund an annuity purchase.

"Because the proceeds resulting from the IRA distribution were taxable, the client instructed the broker-dealer with which he maintained the Client’s IRA to withhold $172,000 for future state and federal taxes," the order stated, noting that the bulk IRA withdrawal resulted in a $102,000 tax liability for the client.

But instead of buying an annuity, Mastrocola reportedly deposited virtually all of the funds into a trust account held by his firm, later transferring $220,000 to an unaffiliated party without the client’s knowledge.

In May 2021, Mastrocola opened a trust account for the client, where he made regular transfers to keep up the appearance that they were receiving annuity payments.

The scheme fell apart later that year in November, when the Massachusetts Securities Division's enforcement unit sent a letter asking for information about all annuities he'd supposedly helped the client purchase. He responded shortly after to admit he hadn't done so.

In May 2022, the Massachusetts Securities Division barred Mastrocola from acting as an investment adviser or broker-dealer within the state. It also fined him $175,000 and ordered $102,000 in restitution. He didn't disclose that order to the CFP Board within 30 days, which the board said violated its rules and was grounds to revoke his certification.

"Respondent testified that he had voluntarily relinquished his rights to use the CFP marks and that he consented to a revocation of that right as a sanction in this case," the CFP Board said in its order.