Mutual Service Corp. of West Palm Beach Fla., and five of its principals are the subjects of a complaint by Financial Industry Regulatory Authority concerning allegedly shoddy and inaccurate books and records over sales of variable annuities, including tax-free exchanges, known as 1035 exchanges.
MSC, with about 1,200 affiliated registered representatives and 800 branches, was acquired by LPL Financial Services of Boston and San Diego this year.
The five principals failed to reasonably supervise the firms review of its variable annuity transactions from March 15 to May 31, 2004, according to the FINRA complaint, which was filed last month.
In turn, MSC allegedly created and maintained inaccurate books and recordings, according to the complaint.
MSC staff created false backdated letters addressed to certain brokers allegedly seeking information about exchange transactions and placed them in MSC’s files, thus giving the appearance the record keeping was done in a timely manner, according to the complaint.
MSC’s staff then altered some of its records during the course of the FINRA then NASD investigation into the firms systems and procedures for supervising its variable annuity business, the complaint alleges.
These changes in special trade blotters and review forms resulted in de-backdating of some transactions, according to FINRA, which is based in New York and Washington.
MSC had no comment about the complaint, said Peter Anderson, the firm’s attorney in the matter, who is a partner with Sutherland Asbill & Brennan in Atlanta.
Mr. Anderson, who is also representing four of the principals, added that the firm will defend itself in the matter.
In a filing with the Securities and Exchange Commission from earlier this month, LPL said it had been indemnified for any potential claims in the matter.
Guiliano Law Group
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