The Massachusetts Securities Division has filed charges against Royal Alliance Associates, alleging the firm failed in its duty to supervise an “unsuitable investment made by one of the firm’s agents, which cost two investors nearly $60,000.” The representative in question, Stephen Davis, was also named in a charge alleging he breached his fiduciary duty, according to ThinkAdvisor.
According to that report, Mr. Davis made a recommendation in 2015 that the couple exchange a variable annuity product for a product with a lower interest rate, three years before the original product expired. Then he failed to timely file the proper paperwork for the annuity exchange, resulting in penalties to the couple that exceeded $15,000, while he received commission payments exceeding $17,000. The complaint also alleges that the early annuity exchange resulted in the couple experiencing “more than $43,000 in lost interest.”
As for Royal Alliance Associates, the complaint alleges the firm failed in its supervisory duties when it denied responsibility for the representative’s actions following a complaint by the couple, and also failed to enforce firm policies and procedures that stated an agent must “demonstrate an economic justification for recommending that a client switch from one product to another,” according to the ThinkAdvisor report. The complaint also alleges that the firm did not file disclosure forms as required in connection to the complaint made against Mr. Davis. In connection with all these allegations, the Securities Division is seeking a fine and an order compelling the respondents to disgorge the profits generated from the alleged misconduct and to pay restitution to the affected investors; the Division is also seeking sanctions and censure.
Massachusetts Secretary of the Commonwealth William Galvin said in a statement about the charges, “Many investors rely on their agent’s assistance in making investments that will best benefit them… Agents and firms have a duty to act in the best interest of their clients.”
According to his BrokerCheck report, Stephen Davis has received two prior customer complaints. In 1997 a customer alleged that while employed at Fisco Equity, he executed unauthorized trades, acted negligently, omitted material facts, and made unsuitable recommendations; that complaint resulted in an award to the customer of $3,760. In 2003, a customer alleged that while he was employed at Jefferson Pilot Securities Corporation, they did not receive their variable annuity policy; that complaint settled for more than $1,400.