Tuesday, June 30, 2009
SEC Brings Action Alleging Sales of Fraudulent and Unsuitable Variable Annuities Through Free-Lunch Seminars
The SEC today instituted an enforcement action against Prime Capital Services (PCS), a Poughkeepsie, N.Y.-based firm, and several representatives and supervisors for their alleged roles in fraudulent and unsuitable sales of variable annuities to senior citizens who were lured through free-lunch seminars at restaurants in south Florida. The SEC alleges that PCS recruited elderly investors to attend the seminars, after which the seniors were encouraged to schedule private appointments with PCS representatives who then induced them to buy variable annuities. The sales pitches allegedly concealed high costs, lock-in periods, and other material information. While the firm and its representatives earned millions of dollars in sales commissions, the Division alleges that many of the variable annuities were unsuitable investments for the customers due to their age, liquidity, and investment objectives.
According to the SEC's order instituting proceedings, PCS is a registered broker-dealer and wholly-owned subsidiary of Gilman Ciocia, Inc. (G&C), an income tax preparation business headquartered in Poughkeepsie that offers financial services in New York, New Jersey, Pennsylvania and Florida. The individuals named in the SEC's order were G&C employees during the time of the alleged misconduct.
An administrative law judge will determine whether the allegations against the respondents are true and, if so, whether they should be ordered to cease and desist from future violations and whether remedial sanctions and penalties are appropriate and in the public interest.