On August 23, 2018, FINRA issued a Letter of Acceptance, Waiver and Consent in which World Equity Group, Inc. (WEG) was censured and fined $100,000. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish, maintain and enforce a supervisory system and written procedures designed to ensure that agents’ recommendations of variable annuities complied with applicable securities laws and regulations.
According to the investigation, during the relevant period (April 2013 – March 2017), World Equity Group lacked a supervisory system that would allow the firm’s principal to determine whether a recommendation to purchase or exchange a variable annuity was suitable. WEG had one Principal for the firm’s 150 registered representatives. The Principal had no prior experience supervising the sale of variable annuities. Moreover, the Firm failed to adequately trained or provide the tools needed to assist in the review of variable annuity transactions. Additionally, the Firm’s procedures did not address the specific suitability considerations relating to the varied fees, costs and surrender periods of different variable annuity share classes.
Per the Letter of Acceptance, Waiver and Consent, WEG failed to identify the pattern of red flags presented by the sale of L-share variable annuities with long-term riders and failed to investigate the suitability of these potential recommendations. For example, during the period of April 2013 through April 2015, the sale of variable annuities represented more than 22% of the Firm’s total revenue, and L-share contracts comprised approximately 43% of the variable annuities sold at the Firm. Also, approximately 91% of the L-share contracts sold at WEG were purchased with long-term riders. WEG was ordered to provide restitution to Firm’s customers who were affected by these deficiencies.
It was unclear from FINRA’s announcement whether customers had initiated FINRA arbitrations or any other type of securities arbitrations. If you believe that you have suffered losses as a result of misconduct, you may contact David A. Weintraub, P.A. 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.