201905.07
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AXA Hit With $3.2M FINRA Fine for Rogue Advisor Who Churned Products

Published by Life Annuity Specialist

by Arthur D. Postal

May 3, 2019

An upstate New York broker’s decision to switch a farming family’s investments from life insurance to variable annuities may cost AXA Equitable $3.2 million.

That’s how much a Financial Industry Regulatory Agency arbitration panel granted to James and Sandra Fitzpatrick, an elderly couple who used to run an egg farm in a Rochester suburb, according to an April 25 arbitration resolution.

Financial advisor Francesco Puccio, who was affiliated with the AXA office in Rochester, is accused of rolling over the couple’s products into variable annuities and earning six figures in commissions in one year, said lawyers at Peiffer Wolf Carr & Kane, who represented the Fitzpatricks.

FINRA’s online BrokerCheck, and documents submitted to the arbitration panel by the Fitzpatricks’ lawyers, showed Puccio was barred from the industry in 2015. He was also found guilty of stealing the entire life savings of an 81-year-old widow, according to the law firm.

However, the arbitration award was much lower than the more than $13 million that the Fitzpatricks sought. The panel awarded them $2.225 million, plus almost $900,000 in legal fees, as well as almost $70,000 in costs.

“The financial professional who was involved in this matter has not been affiliated with the company for more than five years,” a spokesman for AXA-Equitable in New York said. “We do not condone any actions by this individual, which were inconsistent with our policies and values.”

Puccio couldn’t be reached for comment.

The award is believed to be the largest ever paid in upstate New York and the biggest imposed on AXA in arbitration, according to Peiffer Wolf Carr & Kane.

The Fitzpatricks made investments with Puccio starting in 2011. In December 2011, he advised James and Sandra to put more than $700,000 into an Equivest variable annuity, and in 2012, Puccio said they each should purchase a $5 million life insurance policy, according to documents submitted to the arbitration panel.

In spring 2012, Puccio advised Fitzpatrick’s wife to buy a $5 million life insurance policy, and that summer Puccio recommended that the Fitzpatricks, via a family trust, purchase a $5 million flexible premium joint survivorship policy, according to FINRA.

“In light of their age and the excessive premiums charged, these policies are excessive and were taken out not in the Fitzpatricks’ best interest, but in Puccio’s interest in commissions,” according to the document. The premiums were nearly $400,000 per year.

Sandra’s policy was initially funded with more than $2.7 million. Then, in 2015, money from the policy was used to acquire a Jackson National Life annuity for $2 million. This was the second of two Jackson annuities that Puccio sold to Sandra Fitzpatrick “as a result of his desire to earn commissions,” the document said.

Also in 2012, Puccio sold a Transamerica annuity to James for $1.4 million.

“The egg-farming couple fleeced by Puccio did not understand the nature of the variable annuity and life insurance products in which they invested millions of dollars,” their lawyer Jason Kane said in a statement.

He added that, “In what should have been a clear sign of their lack of sophistication, the Fitzpatricks were found to have earlier insurance policies stacked in egg carton boxes and did not seem to be aware they existed. Instead of helping them, Puccio rolled those old policies into newer and larger ones that paid hefty commissions to him.”

Kane said that in one year the farmers paid Puccio well over $200,000 in commissions.

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