Variable Annuity Investor Awarded $1 Million in Finra Arbitration

• Posted on: May 5 2017

A FINRA arbitration panel recently awarded an investor over $1 million in compensatory and punitive damages related to claims that a Wilbank Securities Inc. broker misled her about the performance of a variable annuity. The investor alleged fraud, breach of contract, negligent supervision and breach of fiduciary duty in connection with the underperforming investment.

The investor purchased the variable annuity at a Wilbanks branch in Colorado in 2008, and claims she was promised a 7 percent compounded annual return. She sold the investment in 2012 and received a rate of return that was far less, according to her attorney. The $536,720 in compensatory damages was designed to help the investor recoup those losses. In addition, she was awarded the same amount in punitive damages, which were attributed to the bank’s pattern of harming a group of variable annuity investors who experienced similar problems.

Variable Annuities at a Glance

A variable annuity is a tax-deferred retirement vehicle that allows an investor to select a variety of investments, and then pays out a level of income in retirement that is determined by the performance of the chosen investments. Variable annuities are designed to boost savings by providing investors with long-term capital growth.  Although advocates believe fixed, indexed and variable annuities are a critical component of retirement security because they provide a guaranteed income stream, critics contend that variable annuities are too complex for ordinary investors.

The Wilbanks Arbitration

In this proceeding, the arbitration award says Wilbanks denied the allegations and filed a counterclaim. The investment adviser argued that the investor’s claim was brought more than seven years after she bought the annuity, which did not meet the requirements of FINRA Rule 12206 or state law statutes of limitations. The investor’s claim was filed in January 2016. The three-member panel denied Wilbank’s counterclaim but awarded the investor less than she originally sought.

In any event, this story highlights the importance of the FINRA arbitration process in protecting investors from losses due to misconduct, or sales practice violations. Most brokerage agreements between investors and financial advisors include a mandatory arbitration clause. These proceedings are a faster and less expensive method of resolving disputes than a court trial. 

If you are an investor who is seeking to bring a claim, or an investment adviser in need of representation before a FINRA review panel, you are well advised to engage the services of an experienced securities arbitration attorney.