(Adds that former brokers will be able to dispute allegations,
By Suzanne Barlyn
March 31 Two former brokers for MetLife
Securities Inc, a unit of MetLife Inc, allegedly engaged
in a seven-year scheme to inflate commissions by having
customers switch $21 million in annuities, Wall Street's
industry-funded watchdog has alleged in a civil complaint.
The Financial Industry Regulatory Authority (FINRA) filed
the regulatory complaint against Christopher Birli and Patrick
Chapin, who both worked for MetLife in Williamsville, New York,
until 2012. The two focused on advising employees of the State
University of New York who participated in its retirement plan,
FINRA alleged in a March 27 complaint.
Birli did not immediately return a phone call requesting
comment. Chapin did not immediately respond to an email
requesting comment. Efforts to reach Chapin by telephone were
MetLife, which is not alleged to have engaged in any
wrongdoing, terminated Birli and Chapin in 2012, according to
filings. Neither presently work in the securities industry,
according to filings.
MetLife declined to comment on the complaints against the
former brokers but said it maintains a comprehensive compliance
The two former MetLife brokers, between 2004 and 2007,
allegedly recommended that 45 of their customers switch MetLife
variable annuities held in their retirement accounts with new
variable annuities held in individual retirement accounts (IRAs)
outside the university plan, said FINRA.
Birli and Chapin structured the deals in a way to circumvent
a MetLife policy that generally prohibited exchanging the two
types of variable annuities in the transactions, FINRA alleged.
The brokers advised clients to first cash in their retirement
plan annuities and buy another security within the plan to hold
for 90 days. Clients would then sell that security to buy a
variable annuity through an IRA, according to FINRA.
The scheme generated hundreds of thousands of dollars in
commissions, FINRA said.
FINRA's complaint is the first step in a disciplinary
proceeding that could lead to civil penalties against the former
brokers, including suspending or barring them from the
securities business. The former brokers will have an opportunity
to dispute the allegations before a FINRA hearing officer.
A variable annuity is a type of insurance product that
offers investors steady income payments, typically in exchange
for a lump-sum investment. Payments can grow if financial
markets do well because they are tied to an investment
portfolio, usually consisting of mutual funds holding stocks and
Brokers are well rewarded for selling variable annuities, in
part because of their high commissions, as much as 8 percent.
The alleged scheme subjected investors to unnecessary risks,
FINRA said. For example, the new annuity contracts tied up the
investors' funds for as much as seven years, FINRA said. Some
customers also had to pay fees to cash in their initial
annuities, FINRA said.
Birli and Chapin allegedly concealed the nature of their
scheme from MetLife by submitting "false and misleading"
paperwork to MetLife and using their personal email addresses to
communicate to customers, FINRA said.
(Reporting by Suzanne Barlyn in New York; Editing by Lisa
Shumaker and Eric Walsh)