Filed Under:Your Practice, Regulatory

Illinois slams agent on indexed annuity sales

Large commissions, steep client losses, an aging client base and misleading marketing spur heavy regulatory action

The state of Illinois is moving to shut down the business of a Springfield-based insurance agent alleged to have steered seniors into indexed annuities that earned high commissions for the agent but steep losses for clients.

Illinois state Attorney General Lisa Madigan, filed a lawsuit Thursday in Sangamon County Court against Richard Lee Van Dyke Jr., and his financial firm, Dick Van Dyke Financial Ltd.

The lawsuit asks the court to prohibit Van Dyke from using deceptive marketing and to pay back commissions earned on the sale of replacement annuities to his clients.

See also: Should your financial advisor be in jail?

Court documents state that Van Dyke earned $160,937.05 for 31 transactions, but his clients lost $263,822.13.

At the same time, Illinois insurance director Andrew Boron moved to revoke Van Dyke’s insurance license based on Madigan’s complaint. The revocation will be effective in 30 days, as per Illinois law.

The Madigan lawsuit contends that Van Dyke “falsely advertised and misrepresented” to Springfield seniors that he “acts as an objective, knowledgeable and unbiased financial expert to help them make sound choices in investing their retirement savings.”

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In reality, Madigan said in the lawsuit, “the goal of Van Dyke’s misrepresentations was to gain the trust of older citizens and steer them into buying indexed annuities — mainly insurance investment product — from which he earned high commissions.”

Separately, Madigan said that more than 90 percent of Van Dyke’s business involved commissioned-based annuities sales.

Madigan also alleged that Van Dyke continued to solicit seniors as a registered investment advisor in 2012 after failing to renew the required registration as an investment advisor for securities.

See also: Annuity agents: Get your securities license

In comments to ABC Newschannel 20, a Springfield-based television station, Van Dyke categorically denied the allegations.

“I have an excellent record and I'd like to stand on that and I will vigorously defend myself and my reputation and I will win,” Van Dyke told ABC Newschannel 20.

He admits that 100 percent of his clients are people aged 55 and older, planning for retirement. But he also added that to his knowledge, he has had no client complaints.

The action by Illinois stems from its contention that indexed annuities are securities, not insurance, as is defined in most other states.

This is not the first time Illinois has taken action based on its interpretation of indexed annuities. In May 2011, the Illinois Securities Department revoked the securities registrations of Thomas and Susan Cooper and imposed a $10,000 fine on their company, Senior Financial Strategies, for violating both suitability and fiduciary standards in the course of their indexed annuity sales.

The Coopers sued to reverse the ruling in Sangamon County Circuit, alleging that if the order stood, it would legally establish that any state-regulated annuity would be classified as a security, which insurance agents are not allowed to sell, thereby prohibiting insurance agents from selling annuities.

The court dismissed the suit in July 19, 2011, and the Coopers did not appeal.

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