Massachusetts regulator charges adviser, LPL Financial for sales to retirees

December 1, 2016 11:02 AM EST

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BOSTON (Reuters) - Massachusetts' top financial regulator on Thursday charged a Boston-based investment adviser and his employer, LPL Financial LLC, with fraudulently selling annuities to retirees.

Roger Zullo defrauded his clients, lied to his supervisors and fabricated client financial suitability profiles to enrich himself and his employer by selling identical, illiquid, and high-commission variable annuities, the state said in its complaint. It charged LPL Financial LLC with having failed to properly supervise him.

Zullo, who works near the city's financial district and whose website says that he will help clients develop "integrated wealth and income management strategies," did not immediately respond to a request for comment. His lawyer, David Freniere, also did not immediately respond to a request for comment. LPL did not immediately respond to a request for comment.

In a civil complaint, Secretary of the Commonwealth William Galvin charged that Zullo earned $1.8 million in variable annuity commissions over the course of three years, making nearly all of the money by selling the same annuity product, the Polaris Platinum III (B shares).

The complaint said Zullo had a pattern of switching clients, including many nurses and other healthcare professionals, out of their annuities every six or seven years and earning commissions "over and over again from the same clients." He met one client at a subway station near his office in early 2015 to sign the paperwork to switch her into Polaris Plantinum annuity, the complaint says.

While some at LPL were aware of Zullo's sales habits, the company failed to act appropriately the state said, noting that "Zullo bypassed LPL's paper-thin compliance review process for these sales by fabricating client financial suitability information, such as age and liquid net worth."

Galvin's office has long sought to crack down on financial advisers who may be taking advantage of elderly clients.

In this case, the state is seeking to revoke Zullo's registrations in the state and have the him and LPL return all profit and other payments they received from the alleged wrongdoing.

(Reporting by Svea Herbst-Bayliss; Editing by Chizu Nomiyama)



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