FINRA Disciplines Brokers and Brokerage Firms for Improper Sales of Life Insurance Products

FINRA recently disciplined David Herlicka, Gregory Angelillo, and Great American Advisors, Inc. for rule violations in connection with the sale of variable life insurance products.  The Financial Institution Regulatory Authority (“FINRA”) is responsible for overseeing the sales practices associated with securities.  In many instances, life insurance products are solely regulated by a state regulator.  However, when an insurance product includes a variable investment component, such as a variable annuity or a variable universal life product, FINRA has jurisdiction to oversee those sales as well.

  • David Herlicka, a former broker with NYLife Securities, LLC, was disciplined for misconduct associated with his sales of variable universal life products.  FINRA found that Herlicka made inappropriate and unsuitable recommendations to his customers to purchase these products, and that he knowingly made false statements on his customers’ applications for these products.  FINRA also found that Herlicka repeatedly made false statements to his customers, and failed to inform them of all of the risks of these products, including issues such as the risks created by withdrawing money from the policies, the risks that the policies could lapse, the fact that the actual costs of insurance in the policies increase over time, and the surrender charges associated with a customer taking money back out of the policy.  In one instance, FINRA found that Herlicka surrendered a client’s variable annuity and moved that money into a variable universal life policy without the client’s knowledge or consent.  As a result of these issues, no less than 20 customer complaints have been filed against Herlicka to date.  
  • Gregory Angelillo, a former broker of Pruco Securities, LLC out of Paramus, NJ, was permanently barred from the industry based upon a FINRA investigation that found that Angelillo applied for a variable annuity for a client without her knowledge or consent, including forging her signature on various documents to process the trade.  When Pruco Securities questioned Angelillo about the application, apparently he lied and told the firm that the client was unavailable because she was on vacation.
  • Great American Advisors, Inc., a brokerage firm based out of Cincinnati, OH, was fined $100,000 as a result of a FINRA finding that Great American’s system to supervise the sale of variable annuities was inadequate.  Apparently, at least two of Great American’s brokers recommended and processed trades for customers where those customers cashed out one variable annuity only to purchase another variable annuity with those funds.  Switching between variable annuities is often a bad idea for investors, as it can incur substantial penalties and restart the clock on holding periods before the customers can access their money.  These instances were apparently no exception, with the clients paying over $360,000 in surrender penalties as a result of the recommended switches.  Moreover, this was apparently business as usual for these brokers, as they repeatedly had clients switch between these products.  

If your broker or financial advisor recommended that you purchase a variable life insurance product such as a variable annuity or variable universal life product, and you lost money in that product and do not believe it was an appropriate investment for you, contact us for a free, no obligation evaluation of your account.  You may have the right to file a claim to attempt to recover some or all of your losses.  

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