Prudential fined after 89-year-old customer’s annuity is raided
July 19, 2016 by Wire Service
A Prudential Financial Inc. unit was fined by the Financial Industry Regulatory Authority for overlooking warning signs that an LPL Financial Holdings Inc. salesman was stealing about $1.3 million from an 89-year-old client’s variable-annuity account.
Travis Wetzel, a former LPL sales assistant in Maryland, transferred money from the customer to a bank account held in his wife’s maiden name, according to a statement Tuesday from Finra, a brokerage regulator funded by the finance industry. Wetzel was convicted of wire fraud, and LPL and Prudential reimbursed the consumer. Prudential was ordered to pay a $950,000 fine and didn’t admit or deny wrongdoing, Finra said.
“There were numerous red flags raised over the course of this scheme, and Prudential Annuities Distributors’ failure to adequately respond to them allowed an unscrupulous actor to prey on an elderly customer,” Brad Bennett, Finra’s executive vice president and chief of enforcement, said in a statement.
Regulators have been scrutinizing the market for annuities, in which many customers are elderly. The U.S. Labor Department announced rules in April to protect savers from conflicted investment advice on products including annuities, which provide a guaranteed stream of income. And MetLife Inc. agreed in May to pay $25 million to settle a Finra probe for misleading customers about fees and benefits on the retirement products.
In the Prudential case, Wetzel submitted four to five requests a month to withdraw funds from the client’s account for more than two years through September 2012. Each request triggered an alert within Prudential’s system, but the insurer determined that the withdrawals appeared legitimate, the securities regulator said.
“We are pleased to have resolved this matter,” said Lisa Bennett, a spokeswoman for Newark, New Jersey-based Prudential, who isn’t related to the Finra official. “When we learned of the fraud committed by the unaffiliated third-party broker, we immediately initiated our own investigation and subsequently restored all missing funds to the annuity contract owner. We believe that the settlement is in the best interests of all concerned.”