New York-based Prime Capital Services (PCS) and several of its brokers – Eric J. Brown, Matthew J. Collins, Kevin J. Walsh and Mark W. Wells – face enforcement action by the Securities and Exchange Commission (SEC) for allegedly luring senior citizens and retirees to buy unsuitable variable annuities.
According to the SEC complaint, Prime Capital Services and its parent company, Gilman Ciocia of Poughkeepsie, New York, recruited the majority of clients by offering free-lunch seminars in Florida, encouraging elderly investors to schedule private appointments with PCS representatives. What the meetings reportedly failed to reveal, however, was key information relating to the variable annuities, including their high costs and lock-in periods.
The SEC contends Prime Capital Services and its brokers earned millions of dollars in sales commissions and that many of the variable annuities sold were unsuitable investments for customers due to their age, liquidity, and investment objectives.
In addition, the SEC says representatives from Prime Capital Services told customers that the annuities were “guaranteed” not to lose money, while failing to disclose the fact that the guarantee only occurs upon the death of the person holding the annuity. Prior to that, the value of a variable annuity can fluctuate widely depending on the performance of a portfolio’s securities.
The SEC also named Prime Capital Services’ President Michael P. Ryan in its complaint, along with PCS employees Rose M. Rudden and Christie A. Andersen.
In 2005, Prime Capital Services faced similar allegations and settled with the Financial Industry Regulatory Authority (FINRA). Without admitting any wrongdoing, the company paid a $200,000 fine, replaced the firm’s compliance officer and reportedly enhanced its compliance policies.