Securities Lawyers Blog
Darrell G. Frazier (Frazier) was recently barred from the securities industry by the Financial Industry Regulatory Authority (FINRA) over allegations that Frazier made fraudulent statements in the sales of variable annuities. Frazier is also alleged to have made unsuitable variable annuity sale recommendations to customers.
Frazier first became registered with a FINRA member firm in March 1988. Frazier was registered with Park Avenue Securities LLC from July 2002 through June 2010. From August 2010 through May 2011, Frazier was associated with MML Investors Services, LLC.
FINRA alleged that from 2004 to at least 2009, Frazier made materially false and misleading statements in connection with recommending customers purchase variable annuity products issued by Guardian Insurance & Annuity Company, Inc. A variable annuity is a contract where an insurance company agrees to make periodic payments to an investor either immediately or at some future date. The purchase of a variable annuity contract either involves a single purchase payment or a series of purchase payments.
Frazier has been accused of falsely representing to customers that:
- the annuities guaranteed returns of at least seven percent per year;
- principal invested was guaranteed against loss;
- no annual fees would be charged for purchasing the annuities; and
- Frazier would only make money on the annuity sale if the customer made money.
FINRA alleged that Frazier actively continued to conceal his fraud after selling the variable annuities. When customers complained that their annuities were not performing as promised, Frazier made false statements regarding the annuity’s performance. Frazier was also accused of misstating customer information on account records. It was alleged that Frazier over stated customers’ net worth and income and inaccurately stated customers’ risk tolerances on variable annuity applications. Frazier is also alleged to have had customers sign blank, undated forms that Frazier would later complete.
As a result of the misrepresentations, FINRA alleged that Frazier willfully committed fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, NASD Rules 2120 and 2110, and FINRA Rules 2010 and 2020.
FINRA also alleged that Frazier recommended unsuitable allocations of variable annuities to seven customers. The seven customers were near retirement age, had moderate means, and did not want to lose their principal. Frazier recommended these customers to allocate most or all of their annuity assets investment portfolios in high risk investments. For example, Frazier recommended that six customers allocate 100%, and one customer allocate 54%, of their annuity assets in a speculative emerging markets portfolio. In addition, Frazier recommended that customers take out equity home mortgages in order to invest additional monies in variable annuities. Finally, FINRA alleged that Frazier recommended that one customer, whose variable annuity was past the surrender penalty period, sell that annuity in order to purchase a new variable annuity that exposed the customer to additional sales charges.
Finally, Frazier has been the subject of more than three dozen customer complaints. The vast majority of these complaints involve the unsuitable or fraudulent sale of variable annuities.
The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning the sale of securities, including variable annuities, through misleading statements. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.