Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, James Calder submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of James Calder, Respondent (AWC 2016048601901, February 2, 2017).
The AWC asserts that Calder was first registered in 1999 and by 2002, he was associated with FINRA member firm Raymond James Financial Services, Inc. The AWC asserts that Calder had no prior relevant disciplinary history.
Life Settlement Contracts
During the period from April 2010 to June 2010, Calder failed to comply with NASD Rule 3030 and FINRA Rule 2010 in that he engaged in an undisclosed outside business activity by participating in the sale of life settlement contracts offered by Life Partners, Inc. to Raymond James customers after the firm had expressly denied his request to participate in such activity.
What is a life settlement?
In a "life settlement" transaction, a life insurance policy owner sells his or her policy to an investor in exchange for a lump sum payment. The amount of the payment from the investor to the policy owner is generally less than the death benefit on the policy, but more than its cash surrender value. The dollar amount offered by the investor usually takes into account the insured's life expectancy (age and health) and the terms and conditions of the insurance policy.
Why would a policy owner wish to sell a life insurance policy?
Due to changed family or other circumstances, a life insurance policy owner may no longer need the insurance provided by the policy. A spouse may have died, children may have grown up, or a company with life insurance on a key officer may have been sold or gone out of business. Other policy owners may have difficulty making premium payments or simply need cash. In such circumstances, many policy owners surrender their policies or let their policies lapse by ceasing to make premium payments. Selling a policy to an investor may be another alternative. Such sales may be made through life settlement brokers who charge commissions.
The AWC alleges that in July 2007, Calder had requested permission from Raymond James to sell Life Partners life settlement investments, but the firm expressly denied his request.
The AWC further asserts that:
In 2009, Calder's wife, who was school teacher by profession and had no prior experience in the securities or insurance industries, became licensed by Life Partners to sell its life settlement products.
What Part of "NO" Didn't You Get?
During the relevant time from April 2010 to June 2010, Calder allegedly sold life settlement contracts offered by Life Partners to at least four Raymond James customers despite the firm's prior denial of approval for said sales. As explained in the AWC:
[C]alder recommended life settlement investments to the customers, and when they expressed interest in investing, Calder referred them to his wife to make their investments. Calder further facilitated the customers' investments by answering their questions about life settlement investments and providing them with the necessary paperwork to make the investments. The four customers dealt exclusively with Calder, not his wife, in connection with making their Life Partner life settlement investments. During the relevant time period, Life Partners deposited $8,925 in commission payments for life settlement sales into the joint bank account of Calder and his wife.
The AWC asserts that on February 22, 2015, Calder was:
permitted to resign during Raymond James' internal investigation of his involvement in "selling life settlement to clients."
FINRA deemed Calder's conduct to constitute violations of NASD Rule 3030 and FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Calder a $15,000 fine and a six-month suspension from association with any FINRA member firm in any capacity.
Bill Singer's Comment
A nice, tight FINRA AWC with sufficient content and context to make it both intelligible and compelling.
As of March 9, 2017, Calder's BrokerCheck record discloses under the heading "Customer Dispute - Settled," that Raymond James reported its receipt of a customer complaint on January 15, 2016, seeking $120,000 in damages based upon allegations that:
Violation of Federal Securities Laws, Violation of the Texas Deceptive Trade Practices - Consumer Protection Act, Violation of the Texas Securities Act, Breach of Contract, Common Law Fraud, Breach of Fiduciary Duty, Negligence and Gross Negligence.
The firm characterized the matter as involving "Selling Away." Raymond James reported that the matter settled for $75,000 on April 19, 2016, and that Calder contributed the full amount of the financial settlement.