Carl Zeidler, a broker previously associated with Hornor, Townsend & Kent, Inc. (CRD 4031) in Pennsylvania from January 3, 1994, to August 7, 1997, is currently facing a pending customer dispute filed on January 16, 2024. The dispute alleges that Zeidler recommended an unsuitable exchange that extended the surrender period of the client’s investment by an additional 10 years.
According to the disclosure details, the client, referred to as [REDACTED], met with Zeidler multiple times between October 5, 2022, and January 12, 2023. During these meetings, Zeidler presented a letter from Modern Woodmen explaining that [REDACTED]‘s policy was set to mature on December 1, 2022, and would automatically annuitize, beginning lifetime payments of $899.13 with no guaranteed period if no action was taken.
Zeidler allegedly explained to [REDACTED] that this option would mean she would no longer have direct access to her principal and that if she died prematurely, her principal would be forfeited. To avoid a large tax burden from surrendering the contract, which had been in force since 2001, Zeidler suggested a 1035 exchange to a different contract, the American Equity AssetShield 10 product.
Understanding the allegation and FINRA rule violation
Table of Contents
The complaint against Carl Zeidler centers around the recommendation of an unsuitable exchange, which extended the surrender period of the client’s investment by an additional 10 years. This allegation falls under FINRA Rule 2111, known as the suitability rule, which requires brokers to have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer, based on the customer’s investment profile.
In this case, the client, [REDACTED], was allegedly not fully informed about the implications of the 1035 exchange to the American Equity AssetShield 10 product. The new contract did not provide a fixed, guaranteed rate of return and started a new 10-year surrender charge schedule, with a maximum penalty-free withdrawal of 10% per year and a potential market value adjustment for larger withdrawals.
If the allegations are proven true, Zeidler may have violated FINRA Rule 2111 by failing to ensure that the recommended exchange was suitable for [REDACTED]‘s investment profile and by not fully disclosing the risks and limitations associated with the new contract.
The importance for investors
This case highlights the importance of investors being fully informed about the products they are investing in and the potential risks involved. When a financial advisor recommends a change in investment strategy or a new product, investors should ask questions and ensure they understand the implications of the change.
In this particular case, the 1035 exchange to the American Equity AssetShield 10 product extended the surrender period by an additional 10 years, which could limit the investor’s access to their funds and potentially result in penalties for early withdrawals. Investors should be aware of these restrictions and consider whether they align with their financial goals and liquidity needs.
Furthermore, investors should be cautious of recommendations that involve switching from a guaranteed, fixed-rate product to one with variable returns, as this may expose them to additional market risk. It is crucial for investors to thoroughly evaluate any proposed changes to their investment portfolio and seek clarification from their financial advisor if they have concerns or questions.
Investment fraud and bad advice from financial advisors are unfortunately common occurrences. According to a Forbes article, investment fraud has been on the rise in recent years, with scammers taking advantage of new technologies and the increased accessibility of online investing platforms. Investors should remain vigilant and conduct thorough research before making any investment decisions or trusting the advice of a financial advisor.
Recognizing red flags and recovering losses
Investors should be vigilant in identifying potential red flags that may indicate financial advisor malpractice. Some common warning signs include:
- Lack of transparency or reluctance to fully explain investment products and their risks
- Pressure to make quick decisions or frequent changes to investment strategies
- Recommendations that seem misaligned with the investor’s goals, risk tolerance, or investment profile
- Unauthorized trades or account activity without the investor’s consent
If an investor suspects that they have been a victim of financial advisor malpractice, they may be able to recover their losses through FINRA arbitration. Haselkorn & Thibaut, a national investment fraud law firm with offices in Florida, New York, North Carolina, Arizona, and Texas, is currently investigating Carl Zeidler and Hornor, Townsend & Kent, Inc. in relation to this pending customer dispute.
With over 50 years of combined experience and a 98% success rate, Haselkorn & Thibaut has a proven track record of helping investors recover losses through FINRA arbitration. They offer free consultations and operate on a “No Recovery, No Fee” basis, ensuring that clients can seek justice without upfront costs.
Investors who believe they may have been affected by Carl Zeidler‘s alleged misconduct or any other form of financial advisor malpractice are encouraged to contact Haselkorn & Thibaut at their toll-free number, 1-888-885-7162, for a free consultation.
