Initiated By
FINRA
Allegations
Marino was named a respondent in a FINRA complaint alleging that he recommended unsuitable replacements (also known as exchanges) of non-qualified variable annuities to two customers without having a reasonable basis for recommending the transactions resulting in benefits to him and substantial financial harm to his customers. The complaint alleges that Marino received commissions of approximately $60,000 from the unsuitable transactions. Marino's customers, however, received no benefit from the exchanges he recommended. Indeed, both customers suffered financial harm due to the costs incurred as a result of the annuity replacements. Marino's recommendation to one of the customers resulted in her incurring an $82,523.23 surrender charge. In addition, Marino failed to utilize the tax-free exchange available under Section 1035 of the Internal Revenue Code in recommending non-qualified annuities, causing the customers to incur significant tax liabilities. The new annuities that Marino recommended to replace those being surrendered also resulted in an increase in annual mortality and expense charges, a new, annual advisory fee of 1.5% of the new annuity's value, and new surrender periods. The complaint also alleges that to evade the supervisory scrutiny associated with variable annuity replacements, Marino lied to his member firm. Specifically, in multiple documents provided to the firm, Marino misrepresented the source of funds being used to purchase the new annuities as being from a "check" or money market funds and stated that the annuities being purchased were not replacing existing annuities when that statement was untrue. The complaint further alleges that Marino made false statements in the books and records of the firm by misrepresenting the source of funds being used to purchase the customer's annuities and by stating that the customer's annuity purchase did not involve an annuity replacement or exchange.
On August 3, 2017, Marino was named in an amended FINRA complaint in which an additional cause of action was added to a FINRA complaint originally filed on April 24, 2017. The amended complaint alleged that Marino recommended an unsuitable variable annuity surrender to a semi-retired customer without a reasonable basis for recommending the transaction. The complaint alleges that Marino failed to conduct a reasonable investigation to determine whether the transaction would result in a surrender charge to the customer or the forfeiture of any benefits. In fact, the transaction resulted in a $6,980.52 surrender charge, and the forfeiture of an enhanced death benefit which exceeded the value of the variable annuity by approximately $28,000, and a lifetime income benefit that provided the customer with the ability to receive annual income payments of $24,305.73.
Resolution
Decision & Order of Offer of Settlement
Sanctions
Suspension
Registration Capacities Affected
All capacities
Duration
one year
Start Date
10/16/2017
End Date
10/15/2018
Sanctions
In light of Marino's financial status, no monetary sanction has been imposed.
Regulator Statement
Without admitting or denying the allegations, Marino consented to the sanctions and to the entry of findings that he recommended unsuitable replacements (also known as exchanges) of non-qualified variable annuities to two customers without having a reasonable basis for recommending the transactions, resulting in benefits to him and substantial financial harm to his customers. The findings stated that Marino received commissions of approximately $60,000 from the unsuitable transactions. Marino's customers, however, did not receive any benefit from the exchanges he recommended. Both customers suffered financial harm due to the costs incurred and new or extended surrender periods as a result of the annuity replacements. Marino's recommendation to one of the customers resulted in her incurring an $82,523.23 surrender charge. In addition, Marion failed to use the tax-free exchange available under Section 1035 of the Internal Revenue Code in recommending non-qualified annuities, causing the customers to incur significant tax liabilities. The findings also stated that Marino made false statements to his member firm and in the firm's books and records by misrepresenting the source of funds being used to purchase the customer's annuities, and by stating that the customer's annuity purchase did not involve an annuity replacement or exchange. The findings also included that Marino recommended an unsuitable variable annuity surrender to a semi-retired customer without a reasonable basis for recommending the transaction. Marino failed to conduct a reasonable investigation to determine whether the transaction would result in a surrender charge to the customer or the forfeiture of any benefits. In fact, the transaction resulted in a $6,980.52 surrender charge, and the forfeiture of an enhanced death benefit which exceeded the value of the variable annuity by approximately $28,000, and a lifetime income benefit that provided the customer with the ability to receive annual income payments of $24,305.73.
