Securities Lawyers Blog
On March 27, 2014, the Financial Industry Regulatory Authority (FINRA) filed a regulatory complaint against two former brokers from MetLife Securities, Inc., a unit of MetLife Inc. According to the complaint, Christopher Birli (Birli) and Patrick Chapin (Chapin), who both worked for MetLife in Williamsville, New York, until 2012, participated in a seven-year scheme to inflate commissions. According to the allegations, the advisors preyed on the employees of the State University of New York, having these retirement-plan participants switch $21 million in annuities. The specific allegations claim that from a period spanning from 2004 to 2011, Birli and Chapin encouraged forty-five of their customers to switch the MetLife variable annuities that they held in their respective accounts in exchange for new variable annuities held in individual retirements accounts, which were outside of the university plan that the State University of New York employees should have adhered to.
MetLife has certain policies in place. One such policy prohibits exchanging certain types of variable annuities. It has been alleged that the two MetLife advisors deceptively designed the deals for their customers in a manner explicitly intended to circumvent this policy. Birli and Chapin allegedly evaded detection by utilizing a three-step process. First, they advised their clients to sell their retirement plan annuities and take the cash. Next, the two advisors had their clients purchase a different security within the retirement plan, which they were required to hold for ninety days. Finally, Birli and Chapin instructed their clients to sell that security in order to buy a variable annuity through an individual retirement account.
Over the seven-year period, a total of $21 million was craftily shifted from the MetLife retirement plan product into the TIAA-CREF plan product, then subsequently placed into the MetLife retail annuities. All the while, Birli and Chapin allegedly reaped commissions of 7.15% for transferring the money into the retail annuities. If the two brokers had followed protocol and sought an exception with MetLife to allow the internal exchange of the retirement plan annuity product for a retail variable annuity, they would have only earned the standard 2% gross dealer concessions. The advisors’ alledged improprieties essentially netted them nearly four times the commissions that they were rightfully entitled to, generating hundreds of thousands of dollars for their own pockets. According to the filings, MetLife terminated Birli and Chapin in 2012. Neither individual presently works in the securities industry, according to filings.