Wednesday, December 20, 2006
Massachusetts' top securities regulator on Tuesday fined Wayland-based Investors Capital Corp. $500,000 for improperly steering elderly customers to unsuitable investments.
The company also must offer customers a chance to recover their money without penalty and with a minimum 3 percent interest if they were 75 or older when they bought the equity-indexed annuities between Jan. 1, 2004 and Dec. 31, 2005.
"This landmark agreement marks the first time a broker-dealer will refund equity-indexed annuities as a consequence of this form of financial elder abuse," Secretary of the Commonwealth William F. Galvin said in a statement.
Investors Capital Holdings, Ltd., ICC's parent company, also will hire an independent consultant to review and report on the company's corporate governance practices.
The administrative complaint, filed in November 2005, claimed the company used unregistered investment advisory services and did not properly supervise or audit its more than 400 sales representatives across Massachusetts.
In one case cited by Galvin's office, a registered Investors Capital agent sold a 71-year-old man more than $700,000 worth of annuities that carried a 25 percent surrender fee for withdrawing money within five years.
Investors Capital's general counsel, Steve Preskenis, said in a statement that the company was pleased to resolve the issue.
"We look forward to working further with the Secretary of State, the Division of Insurance and the Legislature to facilitate improved oversight, understanding and education of these financial products, especially with regard to elderly customers," Preskenis said.
Annuities offer periodic payments and are a popular way to save for retirement. Equity-indexed annuities earn interest based on the performance of stocks or another equity index.
Equity-indexed annuities are often high fee and high commission, Galvin said, and often have features that reduce the real rate of return. Some must be held as long as 15 years before the customer can withdraw money without a penalty, making them unsuitable for older people who are more likely to face financial or medical emergencies.
Investors Capital Holdings shares fell 19 cents to close at $4.90 Tuesday on the American Stock Exchange.