FINRA fined and suspended Centaurus Financial representative Patrick Michael Carroll and ordered Centaurus to pay $1.1 million in fines and restitution for recommending unsuitable variable annuity exchanges, causing customers to incur damages such as surrender charges. Investigators also charged Centaurus with failing to comply with Regulation Best Interest's Conflict of Interest obligations by failing to reasonably supervise firm representatives.
According to the findings, Centaurus broker and investment advisor Patrick Carroll (CRD #2676119) recommended 88 unsuitable variable annuity exchanges by recommending customers exchange existing B-share variable annuities for bonus-share variable annuities with optional death benefit riders.
B-share variable annuities are subject to a surrender period, which is a waiting period from the initial annuity acquisition until some pre-determined future date. Sales or liquidations of existing policies that occur during the surrender period result in surrender fees charged to the customer.
In the case of Centaurus and acting on Carroll's recommendation, customers sold their B-shares during the surrender period, meaning those customers incurred surrender fees of at least 3% while multiple customers additionally surrendered existing benefits, such as living benefit riders. According to FINRA, customers suffered over $630,000 in damages due to the recommendations made without a reasonable basis to believe they would be in the customers' best interests, a violation of Regulation Best Interest.
In addition to the surrender charges incurred by Carroll's customers at Centaurus, FINRA additionally found that the new variable annuities Carroll recommended generally charged even higher fees and had longer surrender periods than the initial B-share variable annuities.
The regulator wrote that Centaurus failed to establish, maintain, and enforce written supervisory procedures to comply with Regulation Best Interest, noting that the firm failed to have policies and procedures in place to address conflicts of interest that might arise from riskier trading strategies like selling B-share variable annuities during their surrender period in order to exchange them for new annuities or other products.
Finally, FINRA discovered that Carroll had three undisclosed tax liens wherein the IRS filed liens against Carroll totaling more than $1 million over the course several years.
A settled customer dispute in Carroll's BrokerCheck file alleged that Carroll failed to disclose fees for advisory services. Carroll denied any wrongdoing.
If you invested with Centaurus Financial, Patrick Michael Carroll, or with any broker or investment advisor who unsuitably recommended you prematurely liquidate or sell variable annuities during their surrender period, in turn resulting in excessive fees such as sales charges or surrender fees, 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.