The U.S. Financial Industry Regulatory Authority (FINRA) has fined Shelton, Conn.-based Prudential Annuities Distributors, Inc. US$950,000 for failing to detect a scheme that saw approximately US$1.3 million stolen from an 89-year-old customer’s account.
“The firm repeatedly failed to adequately investigate ‘red flags’ that Travis A. Wetzel, a former registered sales assistant at LPL Financial and since-convicted felon, was transferring money from the customer’s Prudential variable annuity account to a third-party bank account in his wife’s maiden name,” FINRA says in a statement.
The firm settled the allegations without admitting or denying the allegations. Prudential and LPL also reimbursed the customer for her losses.
Wetzel submitted 114 forged annuity withdrawal requests over two years, FINRA says, and Prudential repeatedly followed his instructions without investigating red flags that should have alerted the firm to the scheme. Every transfer request triggered an alert, which the firm reviewed, FINRA adds, but erroneously determined that the withdrawals appeared legitimate, and that it did not investigate these alerts any further.
Inadequate supervisory procedures and controls also contributed to the firm’s failure to detect the fraud, FINRA says.
“Firms must ensure that their supervisory systems and procedures are designed to recognize and follow up on red flags. There were numerous red flags raised over the course of this scheme, and Prudential Annuities Distributors’ failure to adequately respond to them allowed an unscrupulous actor to prey on an elderly customer,” says Brad Bennett, executive vice president and chief of enforcement at FINRA.