ComplianceAugust 6, 2009

Ameritas Broker Suspended for Misleading Customers

<p>The Financial Industry Regulatory Authority (FINRA) has fined Ameritas Investment Corp. $100,000 and suspended and fined one of its brokers for inducing customers to take on additional home equity debt in order to purchase variable universal life insurance policies (VULs).</p>

Reported by Rebecca Moore

FINRA said Ameritas, based in Lincoln, Nebraska, was sanctioned for failing to adequately supervise broker Nancy Ziering, who was based in New Jersey, and for advertising violations related to her financial plans. FINRA found that the financial plans she created were misleading and that her recommendations to customers to purchase VUL policies were unsuitable. Ziering was fined $60,000 and suspended for nine months.

The policies were pitched to customers as mechanisms to save for college expenses and retirement.

The regulator said Ziering used misleading financial plans with more than 220 customers whom she recruited through her separate college-planning business, Madison Financial Aid Consultants, between October 2003 and December 2005. Through Madison Financial Aid Consultants, she gave seminars on college planning at schools and other locations for parents with children approaching college age, and following her presentations, she would offer to meet with parents to discuss funding for college and other financial matters.

According to FINRA, the financial plans prepared by Ziering were extremely complicated and confusing and, to be successful, required customers to adhere strictly to all aspects of a detailed plan for 20 years. Although the plans were marketed as a way to demonstrate how customers could save for college and retirement, in nearly every instance they recommended that the customer purchase a VUL policy issued by an affiliate of Ameritas, using money obtained from a mortgage refinancing or home equity loan.

The regulator said Ameritas became aware of Ziering’s use of the misleading plans, but failed to take sufficient action to ensure that she did not continue to use the plans, and also failed to adequately supervise Ziering’s recommendations to use proceeds from mortgage refinancing or home equity loans to purchase VULs.

Prior to FINRA’s action, Ameritas rescinded the VUL policies purchased by six customers who received unsuitable recommendations and refunded their premium payments.

Ameritas and Ziering neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.