Two Ex-MetLife Brokers Fined for Annuities Scheme
Christopher Birli and Patrick Chapin, two former brokers for MetLife Securities Inc., allegedly engaged in a seven-year scheme to pump up commissions by having customers switch $21 million in annuities.
A variable annuity is a type of insurance product that offers investors steady income payments, typically in exchange for a lump-sum investment. Payments can grow if financial markets do well because they are tied to an investment portfolio, usually consisting of mutual funds holding stocks and bonds. Brokers are well rewarded for selling variable annuities, in part because of their high commissions, as much as 8 percent.
Between 2004 and 2007, the two former MetLife brokers, allegedly recommended that 45 of their customers switch MetLife variable annuities held in their employer plan retirement accounts with new variable annuities held in individual retirement accounts (IRAs) outside their employer plan. Birli and Chapin structured the deals in a way to circumvent a MetLife policy that generally prohibited exchanging the two types of variable annuities in the transactions. The brokers advised clients to first cash in their retirement plan annuities and then buy another security within the plan to hold for 90 days. Clients would then sell that security to buy a variable annuity through an IRA. The scheme generated hundreds of thousands of dollars in commissions and subjected investors to unnecessary risk.
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