Thomas P. Schober, of Westborough, Massachusetts, a stockbroker with SII Investments, Inc., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member after consenting to findings that he made unsuitable recommendations to customers and attempted to conceal his misconduct to his firm. Letter of Acceptance, Waiver and Consent, No. 2015044007001 (Mar. 3, 2016)
According to the AWC, from August 2013 through November 2014, Schober recommended that two senior clients, LP and JM (both of which were in their eighties), purchase annuity products which FINRA deemed unsuitable for such investors. The AWC indicated that LP was JM’s power of attorney due to JM’s dementia. Both individuals were low-risk investors utilizing their limited financial resources to supplement their incomes.
The AWC indicated that pursuant to Schober’s recommendations, JM and LP each sold four of their existing fixed annuities as well as one variable annuity in order to purchase annuities offered via Schober. Apparently, all annuities that such customers were exchanging had surrender penalties, resulting in JM and LP paying an estimated $154,642.00 in total surrender fees. LP and JM reportedly handed over $65,000.00 in commissions to Schober in connection with paying $69,000 in total sales charges. The AWC indicated that the clients were neither informed by LP and JM about the penalties that the customers would encounter when exchanging their annuity products into the annuities sold by Schober, nor informed about the sales charges and commissions that would be paid to Schober in connection with the annuity purchases.
The AWC stated that the annuities that were sold to JM and LP by Schober contained similar insurance protections as the customers’ former policies, but now subjected them to new surrender penalty periods. FINRA found that Schober set forth the proposed annuity recommendations by JM and LP in order to pursue his financial gain at the expense of his customers.
FINRA found that Schober prompted such exchanges of JM and LP’s annuity products, despite not having any reasonable basis to conclude that such exchanges were suitable for the customers, especially considering the massive costs that the customers would bear to exchange annuity products in order to purchase new products that contained a minimal benefit, if any, to the customers. FINRA found that Schober’s unsuitable recommendations were violative of FINRA Rules 2110, 2111 and 2330(b)(1).
The AWC further indicated that Schober had provided his firm and the associated insurance companies with false details about the source of JM and LP’s funds that were used to purchase the annuity products recommended by Schober, all in an effort to conceal that such annuities were being exchanged as opposed to purchased anew. Schober reportedly misrepresented that the customers’ funds, used to purchase annuities, came from the customers’ banking accounts as opposed to from existing annuity products. The AWC indicated that Schober stated that the annuities purchased by JM and LP were not replacing existing annuity products. FINRA found that Schober’s conduct in this regard was violative of FINRA Rule 2010 and 4511.
Public disclosure records reveal that Schober was terminated from SII Investments, Inc., amid allegations of Schober’s failure to comply with the firm’s policies concerning annuity surrenders and the reinvestment of such proceeds, and falsifying information concerning the nature of such purchases.
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