There were other options available at far lower costs, “but the most obvious to me is the traditional rollover route,” said Wojciechowski, who also questioned why LPL was not named in the SEC complaint.
“One thing that’s frustrating about this is, the complaint lays cover for LPL by alleging these brokers lied to LPL on their Outside Business Activities forms where they disclosed these affiliations, as “non-securities related” as if that takes LPL off the hook. It doesn’t,” he argued.
Beyond posing as representatives of the government, “in some instances, investors were led to believe that their funds would be invested in a product that was offered, vetted or specifically selected by the TSP,” the SEC said.
Cooke and his fellow reps even sent investors incomplete or modified transaction forms as well as written materials they devised that obscured the fact that the investment was a privately issued variable annuity with no connection to the TSP and would be processed through a private brokerage firm the brokers were associated with, the SEC said.
Cooke and the reps “were motivated by the prospects of higher commissions as they targeted federal employees age 59½ and over and intentionally obscured important details when recommending variable annuity purchases. They even allegedly excluded the words ‘variable annuity’ from some materials they shared with TSP account holders,” said Aaron W. Lipson, then-associate director of the SEC’s Atlanta regional office, in the original suit. (Lipson is now a partner in the law firm of King & Spalding.)
Some of the reps even opened up brokerage accounts at LPL in their customers’ names without the customers’ knowledge or consent, because the broker-dealer required customers to have accounts before reps could sell variable annuities, the SEC said.
“Some of the investors did not learn of the creation or existence of these accounts in their names until after their TSP accounts had been liquidated (that is, when the underlying securities were sold) and the funds transferred to purchase the variable annuity,” the agency said in its complaint.
While the SEC is seeking penalties and restitution for the affected federal employees, to date Cooke has settled with just one customer (for $20,254.87 in 2014). The customer said Cooke misrepresented himself as a federal employee and that they were misled into purchasing a variable annuity, according to Cooke’s BrokerCheck record.