NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Joseph Anthony McIntyre
AWC/2010024485401/December 2011

McIntyre sold equity indexed annuities (EIAs) without providing his member firm with prompt written notice of the business activity. The findings stated that the EIAs were insurance-issued and were not securities products. McIntyre effected, or participated in effecting, EIA sales totaling about $1,116,370 and received compensation totaling approximately $80,958 from the transactions. 

Joseph Anthony McIntyre: Fined $5,000; Suspended 3 months

Tags:  EIA     |    In: Outside Business Activities

Timothy Clarke Higgins
AWC/2010024338201/November 2011

Higgins sold equity indexed annuities (EIAs) to people outside the scope of his employment with his firm and without providing the firm prompt written notice of the business activity. Higgins’ undisclosed EIA sales totaled about $127,000 and he received compensation totaling about $6,340 from the transactions.

Timothy Clarke Higgins: Fined $3,000; Suspended 30 business days.

Tags:  EIA     |    In: Cases of Note : FINRA

Vikas Goel
AWC/2009020539701/October 2011

Goel placed a customer’s signature on statements he prepared in connection with providing a rationale for his recommendations that the customer sell mutual funds and invest the proceeds in an equity-indexed annuity and a variable annuity, without the customer’s knowledge, authorization or consent.

Unbeknownst to Goel, the firm did not require a customer’s signature on the registered representative’s statement of rationale.

Vikas Goel : Fined $7,500; Suspended 1 month

Tags:  Annuities    EIA    Signature     |    In: Cases of Note : FINRA

Richard Barry Holody
AWC/2010022152201/September 2011

 Holody sold equity-indexed annuities (EIAs) to individuals, through insurance companies, with investments totaling approximately $1,002,555, without providing prompt written notice to his member firm; none of these individuals were customers of his firm. Holody received commissions of approximately $79,594.34 from these sales.

The firm prohibited its representatives from selling EIAs not on the firm’s approved product list; the annuities Holody sold were not on the approved product list and his acceptance of compensation for the sales constituted engaging in an outside business activity.

Holody recommended that a retired individual liquidate some variable annuity contracts and transfer the proceeds to purchase an EIA an insurance corporation issued. Holody processed all of the paperwork on the individual’s behalf to effect the variable annuity contract liquidations to purchase the EIA contract, and the insurance corporation issued a nine-year term EIA contract in the approximate amount of $253,997.37. As a result of these transactions, the individual lost approximately $49,604 in enhanced guaranteed death benefits available under the variable annuity contracts that the individual could never recover. In addition,the insurance corporation EIA contract was also not beneficial to the individual since the variable annuity contracts offered the individual other more favorable features. Moreover, based on the individual’s disclosed investment objectives of guaranteed returns on his retirement assets and to provide for his beneficiaries, and the individual’s financial situation and needs, Holody lacked reasonable grounds to believe that liquidating the variable annuities to generate funds for the purchase of the EIA contract was suitable for the individual.

Richard Barry Holody: Fined $10,000; Suspended 4 months

Tags:  Variable Annuity    EIA     |    In: Cases of Note : FINRA

NFP Securities, Inc.
AWC/2007011393902/June 2011

The Firm approved advertising materials a registered representative used in his retail equity-indexed annuity (EIA) business conducted at workshops for senior citizens that contained false, exaggerated, unwarranted or misleading statements. The firm failed to document, with a principal’s signature or initial, its approval of a piece of advertising material the representative used and failed to maintain a record of its approval of a piece of the representative’s advertising material.

The firm did not supervise the representative’s workshops, in that it did not require him to produce a copy of the script for the workshops and did not attend any of the live workshops to confirm that the contents of the workshops complied with NASD rules and that only firm-approved materials were being used. If the firm had required the representative to submit a script and had attended his workshops, it would have discovered that he made statements, used materials and engaged in conduct that violated NASD Rules 2110 and 2210, and could have prevented further violations of these rules.

NFP Securities, Inc. : Censured; Fined $50,000

Tags:  Scripts    EIA     |    In: Cases of Note : FINRA

Eric Langholtz
AWC/2009017282801/May 2011

Langholtz sold EIAs outside the scope of his employment relationship with his member firm and received approximately $74,498.65 in compensation. Langholtz did not provide prompt written notice to his firm of the outside business activity and on at least one occasion, represented on a firm outside business activity form that he was not engaged in outside business activity regarding non-variable insurance or annuities of other companies except through an approved firm agency selling agreement; that representation was false since he had received compensation from the outside sale of EIAs. Langholtz continued to engage in selling EIAs outside the firm’s agency despite its specific prohibition against doing so in its WSPs.

Eric Langholtz: Fined $5,000; Suspended 5 months

Tags:  EIA     |    In: Cases of Note : FINRA

Gary Scot Cohen (Principal)
AWC/2009020792101/May 2011

Cohen sold equity indexed annuities (EIAs), issued by an insurance company that was not a FINRA member, outside the scope of his employment with a member firm, and without providing the firm prompt written notice of the business activity. Cohen effected undisclosed EIA sales totaling over $1.5 million and received compensation totaling about $176,000 from the transactions. Cohen effected the sales directly with the insurance company that issued the EIAs rather than through the insurance company affiliated with his firm.

Cohen completed an outside business activities questionnaire for the firm in which he falsely represented that he was not licensed as an insurance agent for the purpose of selling fixed insurance with any entity other then the insurance company affiliated with the firm and its approved programs, and that he had not engaged in any outside business activity.

Gary Scot Cohen (Principal): Fined $5,000; Suspended 4 months

Tags:  Annual Compliance Certification    EIA     |    In: Cases of Note : FINRA

John Godfried Croes Jr.
AWC/2009017291201/May 2011

Croes sold EIAs outside the scope of his employment relationship with his member firm and received approximately $84,917.14 in compensation. Croes did not provide prompt written notice to his firm of his outside business activity, and represented on annual certification statements and/or outside business activity forms that he was either not engaged in outside business activity or that he had previously disclosed such activity; these representations were false. Despite a specific verbal warning by his firm to discontinue selling EIAs outside the firm’s agency, Croes continued to do so, despite the firm’s specific prohibition against doing so in its WSPs.

John Godfried Croes Jr.: Fined $5,000; Suspended 8 months

Tags:  Annual Compliance Certification    EIA     |    In: Cases of Note : FINRA

Michael Steven Jacobson
AWC/2009017282401/May 2011

Jacobson sold Equity Indexed Annuties ("EIA") outside the scope of his employment relationship with a member firm, and received approximately $488,266.41 in compensation. Jacobson failed to give prompt written notice to his firm of his outside business activity and represented on annual certification statements and/or outside business activity forms that he was either not engaged in outside business activity or had previously disclosed such activity; these representations were false. Despite a specific verbal warning from his firm to discontinue selling EIAs outside his firm’s agency, he continued to do so despite the firm’s specific prohibition against doing so in its WSPs.

Michael Steven Jacobson : Fined $5,000; Suspended 18 months

Tags:  Annual Compliance Certification    EIA     |    In: Cases of Note : FINRA

Andrew Gregory McGrath
AWC/2009018123301/February 2011

McGrath engaged in an outside business activity and failed to provide prompt written notice to his member firm; McGrath sold EIAs and earned approximately $104,000 in commissions. McGrath completed and signed a firm annual questionnaire, on which he failed to disclose his outside business activity, and failed to update his Form U4 to disclose the outside business activity, and at no time did he provide written notice to his firm.

Andrew Gregory McGrath: Fined $5,000; Suspended 3 months

Tags:  Annual Compliance Certification        EIA     |    In: Cases of Note : FINRA

Resource Horizons Group LLC
AWC/2009017637201/February 2011

The Firm approved advertising materials registered representatives used during several public seminars; the firm sent invitations to members of the public, and the seminar attendees received supplemental materials designed to introduce the firm and the financial services it offered. The invitations failed to provide a sound basis for evaluating the facts regarding the products or services offered. The supplemental materials contained exaggerated and unwarranted language, and the seminar handout had unwarranted language.

The seminar presentations failed to explain a product or strategy.  The discussion of equity-indexed annuities (EIAs) failed to provide a balanced presentation and omitted information.  The discussion of variable annuities omitted material information.

The presentations failed to disclose

• that projections are hypothetical and are not guarantees,
• risks attendant with options transactions, and
• risks and rewards of real estate investment trusts (REITs) in a balanced way.

The discussion of expenses pertaining to mutual funds and variable annuities was misleading; discussion of annuities in Individual Retirement Accounts (IRAs) was misleading.

The list of benefits and features of variable annuities failed to disclose potential restrictions and costs, discussion of 1031 exchanges failed to elaborate on Internal Revenue Code restrictions. The discussion of variable annuities provided an incomplete, and oversimplified presentation and representation that safety and protection are provided by diversification market index certificates of deposit, puts, and living benefits profits provided by variable annuities was promissory and exaggerated.

The firm failed to reasonably supervise its communications with the public and its supervision was not reasonably designed to meet the requirements of FINRA Rule 2210(b)(2). The firm’s procedures required the supervisory principal to evidence approval by signing public communications submitted for approval and use, but the supervisory principal only initialed a coversheet that did not identify which communication was approved. In addition, the firm failed to maintain records naming the registered principal who approved the public communication or the date approval was given, nor documentation establishing that a certified registered options principal approved options material or that the material had been properly submitted to FINRA’s Advertising Regulation Department for pre-approval.

Resource Horizons Group LLC : Censured; Fined $15,000

Tags:  REIT    EIA    Variable Annuity     |    In: Research and Advertising

Larrye Alfie Smith (Principal)
AWC/2009020119101/January 2011

Smith engaged in business activities for compensation outside the scope of his business relationship with his member firm without providing the firm with prompt written notice. Smith sold EIAs valued at $148,850 without notifying the firm.Smith used a business card the firm had not approved, distributed a seminar invitation the firm had not approved and conducted a seminar of which the firm was unaware.

Larrye Alfie Smith (Principal): Censured; Fined $7,500; Suspended 6 months

Tags:  EIA     |    In: Outside Business Activities

Leonard Raymond Connell
AWC/2009020402601/January 2011

Connell engaged in outside business activities without providing prompt written notice to his member firm. Connell sold equity-indexed annuities (EIAs) to investors, which included customers of his firm, through insurance companies, with investments totaling approximately $3,490,000, and Connell received commissions of approximately $91,030.00 from these sales. During the relevant period, the firm prohibited its representatives from selling EIAs as an outside business activity.

Leonard Raymond Connell: Fined $5,000; Suspended 3 months

Tags:  EIA     |    In: Outside Business Activities