In a recent development, customers have alleged that they were misled and inadequately educated when purchasing a variable universal life insurance policy from Douglas Farris, a broker associated with NYLIFE Securities LLC (CRD 5167). The incident, which occurred in October 2012, has resulted in the customers requesting reimbursement of all premiums paid since the policy’s inception. The case was settled on February 7, 2024.
According to the disclosure details, Farris appears to have inadvertently selected the incorrect life insurance option. In an effort to rectify the situation and make the customers whole, NYLIFE Securities LLC offered to credit the policy’s cash value. The case highlights the importance of proper education and transparency when selling complex financial products like variable universal life insurance policies. Investopedia notes that variable universal life insurance combines the features of variable and universal life insurance, making it a complex product that requires thorough understanding from both advisors and investors.
Understanding variable universal life insurance and FINRA rules
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Variable universal life insurance is a type of permanent life insurance that combines death benefit coverage with an investment component. Policyholders can allocate a portion of their premiums to various investment options, such as mutual funds, with the potential for cash value growth. However, these policies are complex and carry investment risks, making it crucial for financial advisors to thoroughly educate their clients about the product’s features and risks.
FINRA Rule 2330 governs the recommendation and sale of variable insurance products by registered representatives. The rule requires advisors to have a reasonable basis for believing that the product is suitable for the customer based on their investment profile, financial situation, and needs. Additionally, advisors must provide customers with a current prospectus and other relevant information to help them make an informed decision.
The significance for investors
The case involving Douglas Farris and NYLIFE Securities LLC underscores the importance of investor education and protection. When purchasing complex financial products like variable universal life insurance, investors must be fully informed about the product’s features, risks, and costs. Misrepresentation or inadequate disclosure by financial advisors can lead to significant financial losses for investors. Investment fraud and bad advice from financial advisors can have devastating consequences for investors, making it essential to work with reputable professionals and stay vigilant.
Investors should carefully review the information provided by their financial advisors and ask questions to ensure they have a clear understanding of the product before making a decision. It is also essential to monitor the performance of the policy and regularly communicate with the advisor to address any concerns or changes in financial circumstances.
Red flags and recovering losses
Investors should be aware of potential red flags that may indicate financial advisor malpractice, such as:
- Lack of proper disclosure about product features, risks, and costs
- Recommending products that are unsuitable for the investor’s financial situation or goals
- Failing to provide a current prospectus or other relevant information
- Pressuring investors to make quick decisions without adequate time for review
If investors suspect they have been misled or suffered losses due to financial advisor misconduct, they may be able to recover damages 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 Douglas Farris and NYLIFE Securities LLC and offering free consultations to affected clients.
With over 50 years of experience and a 98% success rate, Haselkorn & Thibaut has a proven track record of helping investors recover losses through FINRA arbitration. The firm operates on a “No Recovery, No Fee” policy, ensuring that clients can seek justice without upfront costs. Investors can contact Haselkorn & Thibaut for a free consultation by calling their toll-free number at 1-888-885-7162 .
