SWS is a FINRA member firm who at one point had in excess of 300 registered representatives operating out of various offices throughout the United States selling variable annuities among other investments to customers. On August 13, 2015, the firm concerning tax deferred variable annuities – violating FINRA Rules 2010, FINRA Rule 2030, and NASD Rule 3010. Department of Enforcement v. SWS Financial Services, Inc., No. was fined $50,000 by FINRA’s Office of Hearing Officers for SWS’s failure to properly supervise transactions2011025622001 (Aug. 13, 2015).
FINRA’s Hearing Panel
FINRA’s Extended Hearing Panel concluded that SWS’s written supervisory procedures and supervisory systems had not been reasonably designed to comply with FINRA’s Rule 2330 because SWS’s written supervisory procedures had failed to adequately state a process for suitability review associated with certain types of variable annuity transactions and establishing the requisite time for submitting variable annuity transactions to the issuing insurance companies.
The Extended Hearing Panel further concluded that 38 of the variable annuity applications, prior to being reviewed by one of SWS’s registered principal, were sent to the issuing insurance companies. Further, the Panel concluded that SWS had not developed supervisory procedures in order to monitor the staff’s rates of executing the variable annuity exchanges.
FINRA Rule 2330 ultimately provides that FINRA member firms like SWS must have a principle review and ultimately determine approve/disapprove his/her staffs’ recommended exchange or purchase of a deferred variable annuity prior to transmitting a customer’s application for a deferred variable annuity to the issuing insurance company for processing. The Rule indicates that the principal can only approve the transaction if he/she determined there is a reasonable basis to believe that the recommended transaction would be suitable for the customer.
Additionally, FINRA Rule 2330 requires that a firm implement surveillance procedures to determine if any member’s staff have rates effecting deferred variable annuity exchanges that raise for review whether such rates of exchanges evidence conduct inconsistent with provisions of the FINRA Rule 2330 among other FINRA rules or federal securities rules. FINRA requires that firms have specific training policies in place to ensure registered principles who review transactions in deferred variable annuities comply with requirements of FINRA Rule 2330 and that they actually understand the material features of deferred annuities.
FINRA’s Public Disclosure Records
According to public disclosure records, SWS has faced a total of 13 disclosure events for misconduct, 7 of which were regulatory events and 5 of which were arbitrations. Arbitrations involving awards against SWS contained allegations of breach of fiduciary duty, misrepresentation, omission of facts, suitability mishaps, account related negligence, and failure to supervise.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.