Frederick David Holloway of Easton Maryland a stockbroker formerly employed by Holloway Associates Inc. has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity according to an Amended Hearing Panel Decision containing findings that (1) Holloway made bad annuity recommendations to customers of the firm and (2) Holloway omitted information and altered documents provided to FINRA in the course of its investigation into Holloway’s activities. Department of Enforcement v. Frederick David Holloway Disciplinary Proceeding No. 2016050025401 (Apr. 11, 2019).
According to the Decision, for forty-two exchanges of variable annuities Holloway executed for customers of Holloway and Associates Inc., he neglected to reasonably compare the surrender costs, fees and benefits of those exchanges. Holloway reportedly admitted to FINRA that he did not undertake a meaningful comparison of the annuities involved in the exchanges. Apparently, in all of the forty-two annuity transactions, customers were advised by Holloway to transfer from their existing annuities to new annuities issued through Transamerica even though the existing annuities and proposed annuities contained comparable features.
Holloway supposedly claimed that it was justified for the customers to incur costs in switching the annuities because of his view that the Transamerica annuities were better. Yet, Holloway admitted to having failed to conduct any comparison between the annuities customers’ held and the Transamerica annuities. FINRA’s Extended Hearing Panel found Holloway lacked a reasonable foundation to conclude that it was justified for customers to make the annuity switches.
The Decision also stated that it was not proper for Holloway to steer customers towards exchanging their existing annuities into the Transamerica annuities based on Holloway’s position that the bonus feature offset the costs of the switch. Supposedly, Holloway failed to take into account the costs pertaining to the bonus feature when he made the recommendations. FINRA concluded that Holloway failed to reasonably comprehend the investments he recommended before making recommendations.
Moreover, Holloway reportedly admitted that he failed to evidence his comparisons of customers’ existing annuities with the Transamerica annuities he recommended. FINRA indicated that there was no documentation showing that customers were provided any disclosures about the exchanges. Holloway then admitted that it was problematic for him to educate customers about the pros and cons of switching annuities because it could result in a customer not deciding to move forward with the switch, which would preclude Holloway from earning commissions. The Hearing Panel indicated that Holloway possibly harmed customers through causing the customers to pay unwarranted expenses and fees, all while Holloway earned lucrative commissions. Therefore, FINRA’s Hearing Panel found Holloway’s unsuitable investment recommendations to be violative of FINRA Rules 2010 and 2330.
FINRA’s Hearing Panel also concluded that Holloway falsified and misused customer documents pertaining to the exchange of customers’ variable annuities. Particularly, customers were reportedly instructed by Holloway to sign incomplete applications to effect annuity transactions. After customers signed the blank documents, Holloway’s assistant reportedly completed the applications and furnished them to the insurance companies for processing without customers’ having a chance to review the assistant’s changes. Holloway even admitted to having maintained a signed, blank application for a customer’s annuity exchange where Holloway re-used the customer’s signature to effect additional transactions. Additionally, Holloway admitted that customers’ initials were placed by Holloway or his assistant on documents when the insurance companies flagged the documents for missing or incomplete information. FINRA’s Hearing Panel found that Holloway’s conduct in this regard was not unauthorized and therefore violative of FINRA Rule 2010.
According to the Decision, Holloway also altered documents that were submitted to FINRA in its investigation into Holloway’s activities. For example, Holloway evidently altered the annuity applications by adding information about customers’ investment time horizons. In addition, Holloway purportedly failed to produce documents to FINRA personnel because of his concerns that FINRA would view his variable annuity exchange activities as improper. FINRA concluded that Holloway’s failure to comply with its investigation was violative of FINRA Rules 8210.
Holloway’s registration with Holloway Associates Inc. has been terminated as of February 14, 2019.
