AXA Advisors is on the hook for close to $4 million over alleged failures in supervising the variable annuity and insurance sales by one of its brokers and, in a separate case, alleged misrepresentations to 401(k) plan participants.
A Finra arbitration panel has ordered the firm to pay $3.2 million to a New York egg-farming family over an alleged variable annuity and life insurance scheme perpetrated by one of the firm’s former financial advisors, according to the law firm that represented the alleged victims.
Francesco Puccio, who was affiliated with AXA from 1999 to 2009 and again from 2011 to 2014, according to BrokerCheck, allegedly caused millions of dollars in damages to the Fitzpatrick family by rolling old insurance polices “stacked in egg carton boxes” that they weren’t aware of into newer and larger ones that paid him substantial commissions, the law firm Peiffer Wolf Carr & Kane says in a press release. In just one year, Puccio collected more than $200,000 in commissions, the law firm says.
“AXA sent a felonious broker to serve unsophisticated and elderly clients and then completely abdicated its supervisory obligations,” PWCK partner Jason Kane says in the press release. “Nonetheless, an unrepentant AXA contended throughout the arbitration that everything was ‘perfectly suitable’ and ‘beyond reproach.’ This elderly couple may have had wealth, but they did not have investment savvy. AXA and Puccio took them to the cleaners by recommending obviously unsuitable variable annuities and life insurance policies.”
A spokesperson for AXA tells FA-IQ: "The financial professional who was involved in this matter has not been affiliated with the company for more than five years. We do not condone any actions by this individual which were inconsistent with our policies and values. We remain committed to serving our clients with integrity. We have strict policies governing relationships with affiliated financial professionals. This individual did not have a criminal record during the time he was affiliated with the Company."
The Fitzpatricks and The Fitzpatrick Family Trust originally sought more than $13 million, according to an arbitration award document published by Finra.
The panel opted to hold AXA liable for $2.2 million in compensatory damages, $67,294 in costs and $889,869 in lawyers’ fees, Finra says. After leaving AXA in January 2014, Puccio became registered with Cambridge Investment Research, but the firm discharged him in July 2015 over allegations of engaging in “criminal activity regarding the wrongful taking of property,” according to his BrokerCheck profile.
Finra barred Puccio a month later over his alleged failure to provide requested documents connected to an investigation of allegations that he had “converted funds from a non-firm customer,” the regulator says.
Separately, Finra fined AXA $600,000 and ordered it to pay around $172,000 in restitution for distributing materials to 401(k) plans that allegedly misrepresented certain bond funds as "investment-grade" when significant portions of the portfolios were invested in high-yield or junk bonds, according to a press release from the regulator.
AXA’s registered representatives worked with retirement plan sponsors to select from a variety of funds to be included in the group annuity contracts for 401(k) plans offered to the plans’ participants, and AXA sent out documents made by its affiliated life insurance company listing the options available, Finra says.
From September 2010 through November 2015, AXA allegedly sent out documents that “negligently misrepresented” five bond funds, according to the industry’s self-regulator. In one case, for example, 65% of the fund was in high-yield or junk bonds, Finra says. In all, around 14,500 enrollment forms and 2,500 investment options had misclassified the funds’ credit quality, according to the press release.
AXA didn’t admit or deny Finra’s charges in settling the matter, the regulator says.