Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, March 16, 2010

Florida Broker-Dealer Settles Charges It Sold Unsuitable Annuities to Seniors

The SEC today issued an administrative Order imposing sanctions on Prime Capital Services, Inc. and Gilman Ciocia, Inc. The Order finds that from approximately November 1999 through February 2007, Prime Capital Services, Inc. (PCS) sold unsuitable variable annuities to senior citizens in south Florida by means of material misrepresentations and omissions. It also finds that PCS's parent company, Gilman Ciocia, Inc. (G&C), aided and abetted the broker-dealer's fraud by arranging and marketing free-lunch seminars in the south Florida area at which PCS registered representatives recruited elderly customers whom they later induced to buy variable annuities.

Based on the above, the Commission has issued an Order that, among other things, orders PCS to disgorge $97,389.05 plus $46,873.53 in prejudgment interest and orders G&C to pay $1 in disgorgement and a civil monetary penalty of $450,000 to be paid in three installments. In addition, PCS and G&C have agreed to a number of undertakings, including hiring an independent compliance consultant to review and recommend changes to PCS's supervisory procedures; restricting certain associated persons from involvement in variable annuity sales until the independent compliance consultant has completed its review; refunding the variable annuity fees incurred by certain elderly customers of particular registered representatives; and giving notice of the settlement to elderly customers who bought variable annuities from particular registered representatives in the past five years. PCS and G&C consented to the issuance of the Order without admitting or denying any of the findings of the Order.

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