THE CLIENT'S ATTORNEY CLAIMS IN AUGUST 2011 THE FINANCIAL ADVISOR PERSUADED THE CLIENT TO TRANSFER $300,000 FROM A TAX-DEFERRED ANNUITY TO A NON-DEFERRED ACCOUNT. THE CLIENT'S ATTORNEY CLAIMS THE TRANSFER RESULTED IN AN ADDITIONAL INCOME IN EXCESS OF $70,000 CREATING A TAX LIABILITY OF $17,512 AND A LOSS OF $14,288 IN COLLEGE GRANTS FOR HER DAUGHTER. THE CLIENT'S ATTORNEY CLAIMS THE FINANCIAL ADVISOR INDICATED TO THE CLIENT THAT HE HAD A CONVERSATION WITH THE CLIENT'S CPA REGARDING THIS DECISION. THE CPA HAS DENIED HAVING THAT DISCUSSION AND STATED HE WOULD NOT HAVE APPROVED THE DECISION DUE TO THE NEGATIVE TAX RAMIFICATIONS. A DEMAND IS MADE FOR THE RETURN OF THE TAX LIABILITY AND LOSS OF GRANTS IN THE AMOUNT OF $31,800.

$31,800.00

OUR RECORDS INDICATE ON AUGUST 24, 2011 THE FINANCIAL ADVISOR DISCUSSED OPTIONS TO SUPPORT THE CLIENT'S INCREASING NEED FOR INCOME. REDUCING THE VOLATILITY OF THE PORTFOLIO WAS ALSO A CONCERN AS THERE WERE SIGNIFICANT MONTHLY WITHDRAWALS BEING TAKEN. ONE OPTION WAS TO LIQUIDATE THE LINCOLN CHOICEPLUS VARIABLE ANNUITY AND REALLOCATE THE ASSETS . THIS OPTION WAS DISCUSSED WITH THE RECOGNITION THERE WOULD BE AN INCREASE IN TAXABLE INCOME AND AN IRS PENALTY FOR WITHDRAWAL. ADDITIONALLY, THE CLIENT WAS MADE AWARE OF POTENTIAL AFFECTS ON FINANCIAL AID ELIGIBILITY. ON AUGUST 30, 2011, THE FINANCIAL ADVISOR CONTACTED THE CLIENT'S TAX PROFESSIONAL AND THE REPOSITIONING OF ASSETS WAS DISCUSSED IN DETAIL. THE CLIENT'S TAX PROFESSIONAL AGREED A FULL LIQUIDATION OF THE ANNUITY WAS APPROPRIATE AND IN THE CLIENT'S BEST INTEREST. ON SEPTEMBER 1, 2011 THE CLIENT AND FINANCIAL ADVISOR DISCUSSED THE ANNUITY LIQUIDATION AND REVIEWED THE NEW INVESTMENT REALLOCATION. THE ANNUITY LIQUIDATION: REPOSITIONING OF ASSETS FORM WAS COMPLETED. THE CLIENT ACKNOWLEDGED, WITH HER SIGNATURE, THE REASON FOR THE LIQUIDATION WAS THE NEED TO REALLOCATE ASSETS TO PROVIDE MORE LIQUIDITY TO MEET INCOME NEEDS OVER THE NEXT TEN YEARS. ADDITIONALLY, THE CLIENT ACKNOWLEDGED THE ADVICE OF A CPA AND ACCOUNTANT/TAX PROFESSIONAL WAS CONSIDERED PRIOR TO ENGAGING IN THE TRANSACTIONS. THE CLIENT'S CLAIM FOR REQUEST OF $31,800 IS DENIED.