The Financial Industry Regulatory Authority fined Prudential Annuities Distributors $950,000 on Tuesday for failing to prevent the fraudulent withdrawal of nearly $1.3 million from an elderly annuity holder's account by her financial officer.
Frederick, Maryland-based financial sales assistant Travis Wetzel was convicted of wire fraud and money laundering in 2015 and sentenced to 42 months in prison for forging annuity withdrawal requests on his 82-year-old client's account. The client's name has been kept secret in court and FINRA documents to protect her identity.
Prudential Annuities and LPL Financial Holdings , where Wetzel was registered, jointly reimbursed the client the full amount of $1.28 million in 2013, and FINRA barred Wetzel from the securities industry.
In its decision, FINRA said Prudential's internal systems flagged 114 fraudulent withdrawals - up to five a month - that Wetzel made between July 2010 and September 2012 to wire money from the client's account to one in his wife's name.
Prudential staff reviewed the red flags during six quarterly audits and concluded the transfers to a third-party were legitimate.
The company agreed to pay the fine but did not admit or deny FINRA's findings, according to the financial industry watchdog's decision.
In a statement, Prudential said that it was happy to have resolved the matter.
"When we learned of the fraud committed by the unaffiliated third-party broker, we immediately initiated our own investigation and subsequently restored all missing funds to the annuity contract owner," the company said. "We believe that the settlement is in the best interests of all concerned."
LPL did not immediately respond to requests for comment.