FINRA sanctioned former LPL Financial and present FSC Securities Corporation (both of San Diego, CA) broker Sandeep Varma for multiple violations related to seminar slide show presentations he conducted to promote a complex estate planning strategy that utilized charitable remainder trusts (CRTs) as a tax strategy.
The charges levied against Varma include failure to provide a sound basis for evaluating the CRT tax strategy; failing to provide a balanced discussion of CRTs' risks and rewards; and including claims in his presentation that were exaggerated, promissory, or otherwise misleading.
Investigators reviewed multiple seminars put on by Varma (CRD #1926613) that promoted CRTs and found that his presentation violated industry rules by failing to disclose certain costs associated with the strategy, oversimplified how certain life insurance policy premiums would be funded, and exaggerated CRT performance projections.
For example, Varma purportedly recommended or advised customers to sell appreciated real estate through a CRT, thus avoiding an upfront capital gains tax, and then use the proceeds to invest in securities held within the CRT, including variable annuities and life insurance.
FINRA wrote that Varma's presentation repeatedly stated that the capital gains tax would be eliminated on the sale of appreciated assets and failed to disclose that the capital gains tax would only be avoided at the time of the sale, making no reference to potentially having to pay taxes in the future.
Another instance of misleading material and undisclosed risks, according to FINRA, relates to Varma's portrayal of using life insurance policies to replace the value of the appreciated asset sold to fund the CRT. The report states that Varma failed to disclose that paying life insurance premiums using the CRT's income was dependent on the performance of the investments held by the CRT, and that poor performance could jeopardize this payment stream.
Varma's BrokerCheck report indicates the present disciplinary action is Varma's seventh overall disclosure and follows two recent customer disputes—one settled in litigation for $850,000 and the other pending with damages alleged to exceed $2.7 million. The disputes allege that Varma's recommendations to purchase insurance products were unsuitable.
Varma's file lists several outside business activities, including AMS Marketing Strategies (Varma is listed as President), ATS Financial, and ATS Wealth Management (headquartered in San Diego).
If you have invested with FSC Securities Corporation and ex-LPL Financial broker Sandeep Varma of San Diego, or with any representative or financial adviser whose unsuitable recommendations, omissions of material fact, or failure to disclose risks while conducting a securities seminar has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.