Royal Alliance Associates has been charged by Massachusetts regulators with failing to supervise an agent who cost a couple nearly $60,000 and then denying responsibility when the customers complained.
Royal Alliance agent Stephen F. Davis of Barrington, R.I., has been charged with advising a couple to make a costly annuity exchange and has also been charged with breaching his fiduciary duty to his clients, according to a complaint filed by state Secretary of the Commonwealth William F. Galvin.
The complaint further details how Davis’s failure to file the correct paperwork for the exchange in a timely manner led to the couple being charged more than $15,000 in penalties, while Davis himself received more than $17,000 in commissions for the sale.
The early exchange of the investment to an annuity with a much lower rate resulted in a further cost to the couple of more than $43,000 in lost interest.
“Many investors rely on their agent’s assistance in making investments that will best benefit them,” Galvin said. “Agents and firms have a duty to act in the best interest of their clients.”
In 2015, Davis advised the couple to exchange an annuity product three years before its expiration for another product with a much lower interest rate without Royal Alliance supervision or economic justification, the complaint states.
Royal Alliance failed in its duty to supervise its agent while Davis was providing unsuitable investment advice and continued in their failure to supervise after they denied responsibility for Davis’s actions when the couple complained, Galvin is alleging in the case.
“Royal Alliance did not enforce its own internal policies and procedures, which require an agent to demonstrate an economic justification for recommending that a client switch from one product to another,” the complaint said.
Royal Alliance also “opted not to file the required disclosure forms regarding the complaint against Davis,” the complaint states.
Davis took over the Royal Alliance account of two investors after their previous investment advisor retired, with the knowledge that the investors were inexperienced and would rely heavily upon his advice, according to the complaint.
Galvin’s office is seeking an administrative fine, sanctions, censure and an order requiring the respondents to disgorge all profits and make restitution to compensate the investors.