FINRA Fines Prudential Annuities Distributors, Inc. $950,000 for Failing to Prevent Theft of $1.3 Million From Elderly Customer’s Variable Annuity Account
Tuesday, July 19, 2016
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Prudential Annuities Distributors, Inc. $950,000 for failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer’s variable annuity account. The firm repeatedly failed to adequately investigate “red flags” that Travis A. Wetzel, a former registered sales assistant at LPL Financial and since-convicted felon, was transferring money from the customer’s Prudential variable annuity account to a third-party bank account in his wife’s maiden name. FINRA previously barred Wetzel in May 2013. Prudential Annuities and LPL reimbursed the customer in 2013.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Firms must ensure that their supervisory systems and procedures are designed to recognize and follow up on red flags. There were numerous red flags raised over the course of this scheme, and Prudential Annuities Distributors’ failure to adequately respond to them allowed an unscrupulous actor to prey on an elderly customer.”
FINRA found that, from July 2010 until his misappropriation was discovered in September 2012, Wetzel submitted to Prudential Annuities 114 forged annuity withdrawal requests – four to five withdrawals per month for a total of nearly $50,000 – requesting that Prudential Annuities wire funds from the elderly customer’s account to a third-party account in the maiden name of Wetzel’s wife. Prudential Annuities repeatedly followed Wetzel’s instructions without adequately investigating a variety of red flags that should have alerted the firm to Wetzel’s scheme. For example, every transfer request Wetzel submitted triggered an alert, which the firm reviewed but determined erroneously that the withdrawals appeared legitimate, and the firm did not further investigate these alerts. Prudential Annuities personnel also reviewed certain of the withdrawals as part of six quarterly audits and noticed that the funds were being sent to a third party, but concluded that the activity appeared to be legitimate. Also, when alerted that repeated payments were being made from the customer’s variable annuity account to the same third-party payee, Prudential Annuities concluded that the withdrawals appeared legitimate, without sufficiently investigating or determining the relationship between the customer and the person receiving funds from the customer’s account.
FINRA also found that Prudential Annuities’ inadequate supervisory procedures and controls contributed to its failure to detect and prevent Wetzel’s fraud. In particular, Prudential Annuities did not have sufficient supervisory procedures or controls to identify repeated transmittals of funds from a customer’s account to the same third-party payee.
In settling this matter, Prudential Annuities neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2015, members of the public used this service to conduct 71 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA’s Disciplinary Actions Online database. Investors can also call FINRA’s Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.