Massachusetts regulators charged LPL Financial with failing to supervise financial adviser Roger Salvatore Zullo, who the state says defrauded clients, lied to supervisors, fabricated LPL clients' suitability profiles, and sold illiquid and high-comission variable annuities (VAs) such as the Polaris Platinum III VA to retirees for whom the investments were unsuitable.
According to the Commonwealth, "It is thus yet to be established how many other clients were harmed by Zullo's misconduct."
The complaint specifically alleges that LPL "actively" disregarded and denied countless warning signs and red flags, as well as deliberate and specific supervisory concerns, and an additional written complaint made on behalf of a cognitively impaired senior citizen that identified Zullo's fraud, notwithstanding LPL's process for annuity supervision, which regulators described as "fundamentally flawed."
According to the Secretary's office, LPL's Zullo (CRD #1882087), without regard to his clients' life circumstances, liquid net worth, income needs, and other variables, unnecessarily and prematurely switched customers' existing annuities, in turn causing unnecessary surrender charges, "all of this at an enormous profit to Zullo and LPL."
For instance, Zullo allegedly sold one client the Polaris Platinum annuity to replace an existing Nationwide Achiever Annuity while it was still in its surrender period, incurring a surrender charge. The findings state that, other than her social security benefits, this client's sole source of income at the time was comprised of payments received from the Nationwide annuity.
Regulators say that over the course of three years, Zullo and LPL received more than $1.8 million in VA commissions alone, which includes $1,791,000—or 98% of the total amount—in commissions from the sale of the same annuity product known as the Polaris Platinum III (B Shares) variable annuity.
The state says Zullo's fabrication of clients' financial suitability information allowed him to bypass LPL Financial's "paper-thin compliance review process" in pursuit of his "greed for commissions" that led him to disregard the wellbeing of his clients, including several over the age of 80, experiencing cognitive impairment, and/or who were otherwise unsuitable investors for the VA products.
For instance, Zullo allegedly misrepresented client information on annuity application paperwork, and in at least one case falsely wrote that his client was 10 years younger than she actually was and that she held ten times the liquid net worth that she actually did. The complaint also states that Zullo lied about "nearly all" of his clients during testimony.
The complaint also accuses LPL of rewarding Zullo's "fraudulent sales practices and sales patterns with the accolade of a place in LPL's 'Chairman's Club,'" which is the firm's recognition for brokers and advisers who generate the highest annuity production.
Regulators said "LPL turned a blind eye to the fraudulent activities of one of its top annuity salesmen," while additionally accusing LPL of possessing such a deficient review system for variable annuity sales that the firm was "inherently unable to detect even careless advisory fraud."
Zullo's FINRA BrokerCheck report lists an investment-related business activity called "FinnZullo," which is described as a DBA (entity) for LPL business.
If you have invested with LPL Financial or Roger Salvatore Zullo in Polaris Platinum III (B Shares) or with a broker or adviser in another variable annuity product that was unsuitable for you, or paid for through premature switches or other harmful actions that caused unnecessary surrender charges, commissions, or other excessive and unwarranted fees, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.