Jonathan George Sweeney of San Diego California a stockbroker formerly employed by Navy Federal Brokerage Services, LLC has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Sweeney (1) committed securities fraud (2) made investment recommendations that were not suitable for customers and (3) fabricated customer account documentation. Letter of Acceptance Waiver and Consent No. 2016050142601 (May 16, 2018).
The AWC stated that in November of 2015, customer ML was advised by Sweeney to terminate two of ML’s existing variable annuities and purchase two new variable annuities with the proceeds. The AWC stated that Sweeney made misrepresentations concerning the annuities in order to persuade ML to pursue Sweeney’s recommendations. Evidently, ML was advised by Sweeney that the new annuities carried the same benefits as the customer’s existing annuities, which was apparently untrue in several aspects. Specifically, the AWC stated that the death benefits and living benefits on the existing and proposed annuities contained significant differences. The existing annuities reportedly had enhanced growth features along with guaranteed living benefit riders, and there was a step-up feature on one annuity’s death benefit.
The AWC stated that Sweeney knew that there were serious drawbacks to ML pursuing the purchases recommended by him but omitted that information from ML. Specifically, Sweeney failed to apprise ML that ML would not continue to receive the enhanced death benefits and living benefits through her existing annuities once those annuities were surrendered. Critically, Sweeney failed to inform the customer about the values of those enhanced death benefits and living benefits, which were greater than the customers’ surrender value. Sweeney evidently failed to advise ML about foregoing any growth features on ML’s existing variable annuities by switching to the annuities recommended by Sweeney. FINRA found that Sweeney’s conduct was violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and FINRA Rules 2010 and 2010.
The AWC further stated that Sweeney’s recommendations were not suitable for the customer. In particular, in November of 2015, ML was advised by Sweeney to switch her existing annuities into the annuities recommended by Sweeney. Apparently, ML followed through with transferring her existing annuities, which constituted approximately seventy-two percent of ML’s assets. Yet, the AWC stated that ML depended on the guaranteed income features of her existing annuities and planned to utilize the enhanced death benefit feature to provide a greater benefit to her beneficiaries than her existing annuity’s account value.
The AWC stated that the recommendations made by Sweeney were not suitable for ML in consideration of ML’s financial circumstances, age and retiree status, and ML’s interest in preserving the enhanced death benefit and guaranteed income stream. FINRA noted that the switching of ML’s existing annuities to the annuities recommended by Sweeney caused ML to forego the income and death benefit features that were important to ML while exposing ML to a new surrender penalty period of seven years. The AWC revealed that Sweeney did not possess an adequate foundation for concluding that his investment recommendations were appropriate for ML because of his knowledge about the new annuities not containing features and benefits that were germane to ML’s objectives and needs. Consequently, FINRA found that Sweeney’s conduct was violative of FINRA Rules 2010, 2330(b) and 2111.
The AWC additionally revealed that between December of 2011 and April of 2016, Sweeney instructed customers to provide him with signed but otherwise blank forms, and would reuse original signatures in the completion of new customer forms. Sweeney apparently furnished those documents to the firm as well as the insurance and mutual fund companies so that transactions could be effected in customer accounts. Evidently, Sweeney utilized forms containing unauthentic customer signatures to establish customer accounts and execute fund transfers and securities transactions. FINRA found that Sweeney’s reuse of customer signatures was violative of FINRA Rule 2010. FINRA also found that Sweeney caused the records and books of the firm to be inaccurate; conduct violative of FINRA Rules 2010 and 4511.
Sweeney was discharged from Navy Federal Brokerage Services on April 29, 2016 supported by accusations that he violated the firm’s procedures and policies in reference to procuring customer signatures on account forms.
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