Robert R. Frith II, of Minnetonka, Minnesota, a registered representative with Larson Financial Securities LLC, was fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that made misleading statements to customers concerning variable life insurance contracts. Letter of Acceptance, Waiver and Consent, No. 2014041411001 (Sept. 22, 2016).
According to the AWC, between February 2012 and November 2013, Frith made statements to six of his firm’s customers, via correspondence and submission of reprinted articles to customers, that incompletely or inaccurately described the variable universal life insurance policies that prospective customers would purchase. Apparently, these statements were made to customers in the course of Frith discussing financial planning with customers, in which Frith advised customers about investing in variable annuity strictly as an investment – and not for the insurance associated with the contract.
In some communications with customers, Frith reportedly either withheld mention of death benefits attached to the variable life policies. In others, Frith made comparisons to brokerage accounts, in which he informed customers that the policies would allow for greater withdrawals than such customers could receive versus investing in taxable accounts. The AWC stated that when Frith made such comparisons, he omitted mention of how investment performance in the variable life insurance policies affected the death benefit and cash value.
The AWC further reported that customers were provided with reprinted articles regarding variable life insurance policies, when such articles were not approved by his firm principals. Apparently, such reprinted articles made statements referring to life insurance not being exposed to inflationary risk or market risk, when such statements had not been qualified by Frith or approved by his firm prior to dissemination. FINRA found that Frith’s conduct in this regard was violative of NASD Rule 2210(b)(1)(A).
The AWC additionally stated that Frith’s illustrations used to compare variable universal life insurance policies to other investments were faulty. Particularly, FINRA indicated that his summaries did not contain proper explanations concerning the intent of the illustrations to address the performance of the investments, and failed to incorporate the proper hypothetical gross rate of return and other values as required by IM-2210. FINRA found that as a result of Frith’s aforementioned conduct, he had violated NASD Rule 2210 (d)(1)(A), 2210 (d)(1)(B), FINRA Rule 2210(d)(1)(A), and Rule 2010.
According to FINRA’s BrokerCheck, Frith settled a customer dispute for $14,999.00 in damages on November 11, 2015, amid allegations against Frith of making material misrepresentations and omissions pertaining to a variable universal life insurance policy purchased by the customer.
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