Wesselt made these recommendations between March 2014 and September 2017, Finra said, and ONESCO failed to adequately respond to the red flags sent up by issuers when the customers started racking up the surrender charges on their VAs.
“In September 2015,” said Finra’s complaint, an annuity issuer “requested that ONESCO explain why [Wesselt’s] customers were taking early withdrawals from their variable annuities and incurring surrender charges. In response, ONESCO accepted [Wesselt’s] explanation for the withdrawals, notwithstanding that many of those explanations were inaccurate, without verifying these explanations or reviewing the suitability of [the strategy].
“This issuer requested a second explanation for unusual withdrawals and surrender charges in February 2017. Again, [ONESCO] requested an explanation from [the representative], but took no additional supervisory steps and did not contact a single customer.”
Finra is asking the company to make $1,001,141.86 in restitution to the customers. The amounts being returned to them range from a few thousand to almost $115,000 repaid to one customer.
In 2019, Finra said ONESCO had also failed to supervise another rep named Joshua Ray Abernathy, who was accused of appropriating funds from 14 investors. Abernathy pleaded guilty in 2015 to mail fraud and unlawful money transactions in what the U.S. Attorney’s Office in the Eastern District of Virgina called a Ponzi scheme.
Ohio National dramatically exited the variable annuity business in 2018 and later said it would no longer pay its trailing commissions, a move that launched a brace of (mostly failed) lawsuits by other broker-dealers and reps against the company. One of those reps, an LPL broker named Lance Browning, said that the canceled trailing commissions from Ohio National made up a huge chunk of his business at some $89,000 per year. Observers such as S&P Global said at the time that the regulatory squeeze was likely one reason Ohio National was getting out of variable annuity underwriting.
Richard Wesselt agreed to be barred from affiliating with any Finra member in all capacities, according to the agency’s November letter of acceptance, waiver and consent.