The Securities and Exchange Commission obtained a jury decision finding that a former subsidiary of LPL Financial fraudulently generated $1.7 million in revenue by enticing hundreds of government employees to transfer their retirement assets into higher-fee products. After a 10-day trial in a federal court in Georgia, jurors reached a unanimous decision in support of the SEC's 2017 allegations against ex-LPL-registered agent Federal Employee Benefits Counselors and the firm's former CEO, Jonathan Dax Cooke. The jury determined that FEBC and Cooke breached the anti-fraud provisions of the Securities Exchange Act of 1934 and the Securities Act of 1933 by duping public workers into transferring $40 million in tax-deferred retirement funds into variable annuity contracts with high commissions. Cooke was also found guilty of assisting and abetting LPL's breaches of securities legislation.Â
The SEC filed legal charges against FEBC, Cooke, former CFO Christopher Laws, and former salesmen Danny Hood and Brandon Long in July 2017. According to the agency, Cooke, Laws, Hood, and Long all purported to be linked with Thrift Savings Plan, a 401(k)-style retirement plan for federal employees. The defendants gave FEBC a red, white, and blue eagle emblem that imitated the seals of various government entities, according to the SEC, in addition to picking an official-sounding name.
FEBC Profited $1.7M From The Alleged Fraud
According to the lawsuit, the defendants utilized this fake relationship to persuade 200 public workers between 2012 and 2014 to roll their TSP funds into variable annuity contracts.
According to the SEC, FEBC profited $1.7 million from the alleged retirement savings fraud since the latter investment items included substantial fees. According to the SEC, the defendants opened investor accounts at the broker-dealer without the clients' consent to sell the variable annuities through LPL. However, the defendants, according to the agency, concealed the entire nature of their sales activity from LPL.
Hood and Long both resolved the claims against them in October 2017, agreeing to permanent injunctions prohibiting further breaches of securities law. Two years later, in December 2019, Laws agreed to a $323,000 settlement to end the matter.
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