CLIENT ALLEGED THAT SURRENDER CHARGES ON ACCOUNT WERE NEVER DISCLOSED BY THE REGISTERED REPRESENTATIVE.

$6,116.45

THIS LETTER IS IN RESPONSE TO YOUR REQUEST BASED ON A COMPLAINT MADE BY FOSTER AND [CUSTOMER] ABOUT WHEN WE OPENED DIFFERENT ACCOUNTS FOR THEM. WHEN I INITIALLY OPENED THE ACCOUNTS I HAD SET UP AN APPOINTMENT TO MEET WITH FOSTER TO DO AN ANNUAL REVIEW AT HIS HOME ON HIS ACCOUNT. DURING THAT ANNUAL REVIEW HIS WIFE [CUSTOMER] HAD SAT IN TO ASK ME SOME QUESTIONS ABOUT NOT ONLY FOSTER'S ACCOUNTS BUT ALSO ABOUT INVESTMENTS SHE HAD SET UP AS SHE HAD JUST RETIRED FROM VERIZON I BELIEVE AND WAS NOT REALLY SURE HOW THE ACCOUNTS WORKED SO I SAT WITH HER TO TRY AND EXPLAIN HOW THOSE ACCOUNTS WORKED. WE GOT TO TALKING AND I OFFERED TO DO A RETIREMENT ANALYSIS FOR THEM BASED ON THE FACT THAT THEY HAD LOTS OF DIFFERENT ACCOUNTS SPREAD OUT. WE SET UP A FOLLOW UP APPOINTMENT TO LOOK AT ALL THE DIFFERENT INVESTMENTS. SHE HAD FUNDS IN MET LIFE, TRANSAMERICA, AND MIDLAND BANK. SHE ASKED THAT I BE THERE WHEN CALLING THESE DIFFERENT COMPANIES TO HELP HER ASK THE APPROPRIATE QUESTIONS TO UNDERSTAND THE ACCOUNTS. DURING THESE CALLS I RECOMMENDED ASKING ABOUT THE SURRENDER PERIODS AS TO KNOW WHEN YOU ARE ABLE TO TAKE THE FUNDS OUT WITHOUT A PENALTY IN CASE YOU DECIDED YOU WANTED TO DO SOMETHING DIFFERENT. FOR THE MOST PARTS THESE ACCOUNTS CAME DUE IN AUGUST 2013 AND THESE CALLS WERE MADE IN 2010. THE FIRST TRANSACTION WE MADE WAS TO TAKE THE SURRENDER FREE PORTION OF THE MET LIFE ACCOUNT AND MOVE THAT INTO AN MIP PORTFOLIO. FROM THERE I MET WITH THEM AND LOOKED AT TAKING THE PENALTY FREE AMOUNT OUT OF THE TRANSAMERICA ANNUITY PLUS OTHER FUNDS TO OPEN AN NQDA TO QUALIFY FOR THE BONUS PRODUCT. ON THE DISCLOSURE FORMS IT CLEARLY STATES THE SURRENDER CHARGE OF 5% FOR 5 YEARS AND THEN IN THE REASONING UNDER ADDITIONAL MATERIAL FACTS IT MENTIONS THAT THEY HAVE OTHER FUNDS SO THEY CAN AFFORD TO LOCK IN THE FUNDS FOR 5 YEARS. I KNOW THAT WHEN I SIGN THE PAPERWORK WITH MY CLIENTS I GO THROUGH THE DIFFERENT QUESTIONS ON THE ATDF FORM AND MAKE SURE THEY DO NOT HAVE QUESTIONS ON IT. ADDITIONALLY, THE LITERATURE THAT DESCRIBES THE BONUS PRODUCT DOES DESCRIBE THE SURRENDER FEES IN IT AS WELL AND I BELIEVE I HANDED THAT TO THEM AS WELL. I PROCEEDED TO MEET WITH THE CLIENTS ON A CONSISTENT BASIS AND BE AVAILABLE FOR ALL QUESTIONS WHENEVER THEY HAD THEM. IN 2011 THEY DECIDED THEY WANTED TO SET UP ROTH IRAS SINCE THEY WERE BOTH WORKING AT AN ACCOUNTING FIRM. I SPOKE TO THEM ABOUT THE FIDELITY ADVISOR ROTH IRA AS WELL AS THE VALIC IRA. I SPOKE ABOUT THE FACT THAT FOR ANY ROTH IRA TO BE TAX FREE IT MUST BE IN EXISTENCE FOR 5 YEARS AND REMEMBER SAYING THAT BY GOING WITH THE VALIC YOU WILL SATISFY THE 5 YEAR ROTH RULE BY BEING IN VALIC SINCE YOU CANNOT TAKE THE FUNDS OUT FOR 5 YEARS. I SHOWED THEM BOTH THE FIDELITY ADVISOR AND THE VALIC TO SHOW THEM 2 DIFFERENT OPTIONS, THEY WANTED THE FIXED ACCOUNT SO THEY WENT WITH THE VALIC. AGAIN ON THE ROTH IRA ATDF IT MAKES MENTION IN THE MATERIAL FACTS SECTION THAT SHE CAN AFFORD TO LOCK THE FUNDS IN FOR 5 YEARS ON THE ROTH IRA APPLICATION. THE LAST ACCOUNT I SET UP FOR HER WAS ANNUITY THROUGH JACKSON FOR $10,000 AND THE REASONS BEHIND THIS WERE TO START THE CLOCK ON THE ACCOUNT AND TO SEE IF SHE LIKED THE ACCOUNT BEFORE HER LARGER SUMS OF MONEY CAME DUE IN AUGUST 2013. SHE AGAIN INITIALED THE ATDF SHOWING THE SURRENDER CHARGES ON THIS ACCOUNT AS WELL. WITH THIS ACCOUNT WE SPOKE ABOUT THE FACT THAT EACH SHE DOES NOT TAKE THE FUNDS OUT THE INCOME WILL GROW BY 6% SO THAT THE FACT THAT SHE WAS GOING TO LEAVE IT ALONE THAT THE 4 YEAR SURRENDER PERIOD WOULD NOT COME INTO PLAY.