Cecil E. Nivens, of Gastonia, North Carolina, a registered representative formerly associated with NYLife Securities, LLC, was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that Nivens failed to execute upon customers’ investment instructions, and furnished documentation to customers containing false and misrepresented information. Department of Enforcement v. Cecil E. Nivens, No. 2014040873501 (Mar. 1, 2017).
According to the Complaint, from February 25, 2012, to April 5, 2013, Nivens made recommendations to fifteen of the firm’s customers to transfer customers’ existing annuity holdings tax free into variable universal life insurance policies to pay premiums. In order to accomplish his strategy, Nivens allegedly encouraged investors to take withdrawals from their existing annuity policies and have funds directed to the customers’ personal banking accounts, where the money would then be redirected to fund variable life insurance policies. Nivens reportedly indicated to customers that they could obtain tax free income through effecting a loan from the newly issued variable life insurance policies.
The Complaint stated that NYLife’s policies called for paperwork to be completed in order to effect the purchase of variable life insurance policies, in which the customers were prompted to indicate whether the funds used to purchase the policies would be coming from existing annuities. The NYLife policies were purportedly in place to enable additional suitability questions to be answered by the prospective customers, and for a principal to review customers’ applications for suitability. FINRA’s Department of Enforcement alleged that Nivens’ conduct was designed to circumvent his firm’s procedures and policies based on Nivens’ failure to indicate that customers’ newly purchased variable life insurance policies were indeed replacements of annuity policies.
The Complaint further detailed that Nivens was under a heightened level of supervision from 2010 to the point in which he was terminated, where he knew that his firm questioned the rate and rationale behind his high level of policy replacements. FINRA’s Department of Enforcement alleged that Nivens sought to avoid his firm’s scrutiny of his activities by concocting the scheme in question. Consequently, supervisory personal within NYLife had not been apprised of customers’ policies having been replaced as opposed to purchased anew. Nivens reportedly obtained commissions totaling $185,737.00 based upon his facilitation of fifteen purchases of variable life insurance policies.
According to the Complaint, customers faced substantial tax consequences as a result of Nivens’ recommendation of utilizing withdrawals to purchase the annuity instead of conducting a tax-free transfer known as a 1035 Exchange. In addition, replacements were concealed from NYLife’s supervision procedures and policies as a result of customers using personal checks to fund the insurance policies pursuant to Nivens’ instructions. Moreover, the firm’s documents containing warnings regarding the replacement of annuities or life insurance were reportedly omitted or disregarded by customers based upon the warnings seemingly not applying to their purchases of variable life policies.
Even further, apparently $4,258.19 in surrender penalties had been incurred by eight of the fifteen customers upon surrendering annuities to partake in Nivens’ recommended strategy. Apparently, once customers complained, all but one variable universal life policy was rescinded or surrendered. Nivens’ conduct was alleged by the Department of Enforcement to be violative of FINRA Rule 2010. Nivens also allegedly certified that customers’ replacement forms were accurate when he knew that this was not the case. In so doing, FINRA’s Department of Enforcement alleged that Nivens’ conduct was violative of FINRA Rules 2010 and 4511.
FINRA Public Disclosure reveals that Nivens has been identified in eleven customer initiated investment related disputes containing allegations of Nivens’ misconduct while employed with NYLife Securities and Eagle Strategies LLC. Particularly, on October 1, 2009, a customer initiated investment related written complaint involving Nivens’ conduct was settled for $650,901.16 in damages based upon allegations that Nivens failed to apprise the customer of the interest assessed on a variable universal life insurance policy loan or discuss the customer’s obligation to make premium payments.
On September 18, 2013, a customer initiated investment related written complaint regarding Nivens’ activities was resolved for $31,598.51 in damages based upon allegations that Nivens effected unsuitable variable universal life insurance policies and misstated the customers’ investment profiles on account documentation. From August 23, 2010, to May 26, 2015, nine customer initiated investment related disputes concerning Nivens’ conduct were filed based upon allegations that Nivens made unsuitable recommendations to the customers concerning the insurance policy purchases which caused customers to suffer from adverse tax consequences.
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
