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Monday, January 12, 2004|
NASD Fines LA Broker $1.5 Million
The NASD has ordered John Steven Blount of Lake Charles, Louisiana to pay $1.5 million in restitution plus interest to 10 customers for unsuitable sales of variable annuities and mutual funds totaling over $6 million. Blount also agreed to be barred from the industry.
According to the NASD, Blount generated almost $220,000 in commissions by recommending unsuitable annuities and funds to investors. It also claims that he frustrated attempts by his employer to supervise his activities. The transactions took place between 1998 and 2001 while Blount was a registered representative of NYLife Securities, Inc.
The NASD also found that Blount misrepresented material features of the variable annuities in order to induce customers to purchase the products. Additionally, in an effort to circumvent his firm's review of annuity and mutual fund transactions, Blount directed his sales assistant to falsify firm records regarding customers' financial situations and investment objectives.
"This case was brought after NASD received a complaint from one of Mr. Blount's customers. We view cases such as this as an important outgrowth of our ongoing series of NASD special examinations and investigations that have focused on the sale of variable annuity products, and have resulted in over 75 annuity-related disciplinary actions taken by NASD since the beginning of 2001," said Mary Schapiro, vice chairman of the NASD. "Given the popularity of this product, we will continue to focus examination and investigative resources on a wide range of variable annuity related sales practices."
In one case, the NASD alleged that Blount steered a 62-year-old retiree who wished to keep his principal investment safe and said that he needed $50,000 to buy a car and to make home repairs in a few months into a variable annuity contract that imposed surrender charges for early withdrawals during the first six years of the contract.
Blount also recommended that the retiree place the funds in high-risk sub-accounts that were not consistent with the customer's desire to keep his principal safe.
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