Massachusetts Regulator Fines Infinex for Improper VA and REIT Sales
The Massachusetts Securities Division, led by Secretary of the Commonwealth William Galvin, has fined broker-dealer Infinex Investments Inc. for failing to supervise agents who were selling non-traded real estate investment trusts and variable annuities primarily to senior investors at local banks.
The Massachusetts Securities Division, led by Secretary of the Commonwealth William Galvin, has fined broker-dealer Infinex Investments Inc. for failing to supervise agents who were selling non-traded real estate investment trusts and variable annuities primarily to senior investors at local banks.
Infinex offers securities on bank premises and has selling agreements with approximately 30 banks in Massachusetts.
The Massachusetts Securities Division began an investigation into sales practices by Infinex after receiving complaints from Massachusetts senior citizens, who believed they had been sold investments they did not ask for or did not understand.
The order identifies four investors who filed complaints regarding the sales of commission-based securities products which the regulators deemed unsuitable for their investment objectives and circumstances. It also claims the Infinex failed to disclose that the investors were dealing with a broker-dealer and that the products were not FDIC-insured.
According to the complaint, a 54-year old supermarket clerk with $75,000 in savings and limited investment experience, invested $10,000 in a non-traded REIT and $54,000 in a fixed annuity with a 7-year surrender period. The Infinex representative, who received $3,600 in commissions for the transactions, incorrectly stated that the investor had $750,000 in savings.
“Senior investors are far too often misled at their banks to believe that they are buying products similar to CDs,” said Galvin. “Broker-dealers operating on bank premises have both a legal and ethical duty to make clear to the customers that they are no longer dealing with the bank. Unfortunately, our investigation uncovered serious failures in this regard.”
Galvin noted that the investigation uncovered one supervisor who had oversight of approximately 180 Infinex representatives, testified that he spent “maybe 10 percent” of his week in a compliance function.
The order requires Infinex to pay a fine of $125,000 and to make full restitution to the investors.
In addition, the consent order requires Infinex to cease and desist from further violations of Massachusetts securities laws, imposes a censure, and requires Infinex to retain an independent compliance consultant to review its supervisory structure, supervision of representatives on bank premises, email monitoring and review, use of d/b/a’s similar to the retail bank names, and REIT and annuity sales practices, training and recommendations.
