FINRA fined Ohio National Life Insurance's ON Equity Sales Company (ONESCO) $275,000 and ordered $1 million in restitution for failing to supervise rep Richard Michael Wesselt even after being alerted to a potential problem, who investigators say recommended unsuitable variable annuity and whole life investments to 76 customers, all while Wesselt generated the most variable annuity sales at the firm.
In short, according to FINRA, the misconduct resulted in customers incurring $371,395 in surrender charges while ONESCO earned $732,634 in gross commissions from the annuity sales. FINRA's $1,001,141.86 restitution order included both these charges and other damages/losses suffered as a result of the unsuitable recommendations.
FINRA barred Rich Wesselt (CRD #2195569) in late 2020 over the unsuitable recommendations and customer losses all while Wessel personally earned commissions of $686,025 from the variable annuities sales. The order barring Wesselt also noted that Wesselt had customers sign incomplete or blank documents such as new account documents, variable annuity disclosure forms, or withdrawal documents. Nearly 20 customer disputes in Wesselt's file (most of them settled) alleged unsuitable recommendations, misrepresentations, and omissions.
Making matters worse, FINRA alleged that on multiple occasions, variable annuity issuers contacted ONESCO or Ohio National Life Insurance to raise concerns about the surrender charges being incurred by customers; however, ONESCO failed to conduct a reasonable investigation into the matter.
According to AWC #2018059035703, ONESCO's supervisory failures bubbled over with a failure to detect red flags of Wesselt's unsuitable investment strategy he characterized as "building your own bank."
The report states that the unsuitable "infinite banking" recommendation involved persuading customers to liquidate their retirement accounts (e.g., mutual fund holdings), to use the proceeds to purchase variable annuities, and then to liquidate the variable annuities they just purchased in order to build cash value for variable life insurance policies. Each of these transactions resulted in fees, surrender charges, or commissions.
Investigators found that Wesselt recommended the same VAs with the same income riders and similar asset allocations for most of his customers, regardless of their personal circumstances such as employment, income, time horizon, liquidity needs, and risk tolerance preferences.
FINRA also pointed out that in liquidating their retirement savings, such as IRAs or 401(k)s per Wesselt's recommendation, the customers lost tax and other benefits.
If you invested with ON Equity Sales Company (ONESCO) broker Richard Wesselt or with any investment adviser who improperly recommended you prematurely liquidate a retirement account or other brokerage account to purchase variable annuities or another securities product that was not suitable for your investor profile, including time horizon, risk tolerance, or liquidity needs, resulting in excessive fees, charges, or losses, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
All information in the above post was verified as accurate at the time of posting. We invite readers and the subject(s) of the posting to contact us with new or updated information.