Claim that recommendation of an Individual Universal Life policy was unsuitable based on the client's circumstances.

$295,186.51

$187,500.00

Settlement should not be deemed an admission of guilt or liability. Case settled in the interest of avoiding protracted litigation. Client came in with primary need of long-term insurance coverage. Due to some underlying issues they were not eligible for traditional insurance. Therefore, we researched funding an Indexed Universal Life (IUL) insurance policy. An insurance field marketing organization (FMO) approved through my then broker/dealer CFD Investments. I was put in contact with an employee who specialized in these policies and programs who then lead me through the process covering benefits, funding, and flexibility of use for the clients' needs. This employee explained that they normally fund these policies through a series of notes purchased with the goal of increasing the amount of funding to the IUL and at the same time increasing the cash amount available for client needs in the future. These notes to be purchased were from pensioners who had retired from assorted state employee positions and teachers who had taken out loans against their pension to receive cash now. Since the clients were both retired teachers with pensions in place, they had some familiarity. This employee informed me that the FMO had been purchasing these notes and funding IUL's through this strategy for the last eight years without missing a single payment. It was not until after the initial funding of the IRA and then subsequent funding of the IUL when I became aware that the payments of the notes were in default. At this point, further research revealed that the company who sells these notes had become subject to litigation for predatory lending. I began working with the FMO employee to find resolution for the client. The seller of the notes was being litigated by several but not all the states in which they operated. Through repeated efforts I was able to obtain a complete list of the debtors who should have been making continued payments. I gave this information to the client and helped find a debt collector from the FMO so the client could pursue resolution. After repeated efforts, the debt collector ascertained they were unable to collect these debts. Throughout this ordeal I became aware that the employee had transacted the purchase of the notes by selling away from his employer the FMO, which I had used to facilitate the overall transaction. It turns out there was two employees working for the FMO involved in this program. I was informed that the second employee had been terminated by the FMO. Shortly thereafter the employee whom I had been working with was terminated. I was then directed to senior level employee who would be handling the case going further. I did run illustrations for the client, to show what the minimum amount of funding would be required to keep policy in place while continuing attempts to recoup the funds. To date all efforts to help the client recoup the funds have been unsuccessful. There was no malintent on my part. My only goal was to help the client obtain the long-term care and life insurance coverage needs which they were trying to get in place.

CLAIMANT ALLEGES THAT HIS 2011 INVESTMENTS IN MUTUAL FUNDS AND A MANAGED ACCOUNT WERE UNSUITABLE.

$9,796.13

THE INVESTMENTS WERE SUITABLE FOR THE CLIENT BASED ON THE FINANCIAL INFORMATION THAT WAS PROVIDED BY THE CLIENT. ALL OF THE TRANSACTIONS WERE MADE BASED ON THE EXPRESS CONSENT OF THE CLIENT, WHO KNEW AND UNDERSTOOD THE RISKS INVOLVED IN INVESTING. FINANCIAL ADVISER IS NOT A NAMED PARTY TO THE ARBITRATION.