CLIENT ACCEPTED REP RECOMMENDATION TO SURRENDER A NON-QUALIFIED ANNUITY. CLIENT AND REP WERE UNAWARE OF A PREVIOUS ROLLOVER WHICH RESULTED IN A SUBSTANTIALLY HIGHER SURRENDER PENALTY AND TAXABLE GAIN ON THE SURRENDER.

$333,000.00

$130,000.00

CLIENT PROVIDED ME WITH A NON-QUALIFIED ANNUITY CONTRACT FOR REVIEW WHICH HAD BEEN PURCHASED FROM A PREVIOUS ADVISER. BASED UPON THIS INFORMATION, I RECOMMENDED THAT THE CLIENT SURRENDER THE CONTRACT FOR INCREASED PORTFOLIO DIVERSIFICATION. AFTER SEVERAL MEETINGS, THE CLIENT ACCPTED MY RECOMMENDATION TO SURRENDER THE ANNUITY. THE CLIENT FAILED TO INFORM ME OF A PREVIOUS ROLLOVER OF THIS ANNUITY OR THE ORIGINAL COST BASIS WHICH RESULTED IN A MUCH HIGHER SURRENDER PENALTY AND INCOME TAX LIABILITY THAN ANTICIPATED. HAD I KNOWN OF THE CLIENT'S LOWER COST BASIS OF THE ANNUITY, I WOULD HAVE NEVER RECOMMENDED A SURRENDER OF THIS ANNUITY. THIS COMPLAINT WAS SETTLED TO AVOID THE COST AND UNCERTAINTY OF LITIGATION.