Filed Under:Your Practice, Regulatory

FINRA finds violations in broker's YouTube video

In another chapter in the annals, "Social Media for Agents: Friend or Foe," FINRA recently suspended and fined a registered representative for social media faux pas involving equity index annuities.

The individual publicly disseminated videos through YouTube, invitations to seminars and letters regarding bonus incentives that did not comply with FINRA’s rules, according to the settlement. 

FINRA suspended the registered representative in all capacities for 20 business days and fined him $10,000.The broker is Ralph Hicks, Jr., who first became registered with a FINRA member firm in August 1986 and has no other disciplinary history, FINRA pointed out.

FINRA alleges that  the representative presented equity index annuities favorably in comparison to other types of annuities without disclosing the risks and limitations associated with them, among other things.

What Hicks left out, apparently, were "the risks and limitations of EIAs, such as their lack of liquidity due to surrender penalties, that guarantees associated with EIAs are subject to the ability of the issuer to pay the claims, and limits posed by participation rates and interest rate caps. Moreover, the materials contained incomplete comparisons of EIAs to other annuity types," FINRA found.

Moreover, FINRA said the comparisons contained incomplete information. The representative also presented customer testimonials in videos without making the required disclosures.

Certain YouTube videos contained customer testimonials, yet Hicks did not make required disclosures contained in NASD Conduct Rule 2210(d)(2)(A), FINRA stated.

The “communications also presented oversimplified claims that omitted material information or failed to provide a sound basis for evaluating the facts, and contained exaggerated, unwarranted or misleading statements. The rep also allegedly failed to file with FINRA advertising that discussed registered investment companies within 10 business days of its first use or publication, FINRA reported.

FINRA found that the representative’s actions violated NASD Rule 2210 involving communications with the public as well as  FINRA Rule 2010 involving ethical standards. 

Equity index annuities are often billed as the fastest growing segment of the annuity market. There were record indexed annuity sales of $33.9 billion posted in 2012, according to the Life Insurance and Market Research Association, now LIMRA International Inc.  

Hick's alleged improper actions allegedly took place during a two-year period.

There are many YouTube videos that discuss index products posted by professionals and owners of the products. And someone in Washington is watching them.

FINRA was in the news a couple of years back when it suspended and fined a California-based broker $10,000 for her Tweets that the agency found "misrepresentative and unbalanced."

FOr a full readout of the case, see: http://disciplinaryactions.finra.org/viewdocument.aspx?DocNB=33314 

Updated Aug. 13 with case details, respondent's name. 

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