FINRA Arbitrators Award $2.25 Million Over Life Insurance Strategy
From the desk of Jim Eccleston at Ä¢¹½´«Ã½
A former financial advisor must pay $2.25 million to clients who alleged he recommended a high-risk life insurance strategy that resulted in significant losses, according to a Financial Industry Regulatory Authority (FINRA) arbitration award.
As reported by AdvisorHub, the dispute involved claims brought by a Chicago family representing the estate of Peter Apostal against former broker Matthew K. Wilkes and several firms where he previously worked, including Ä¢¹½´«Ã½lls Fargo, Raymond James Financial Services, FSIC, and TrustFirst. According to AdvisorHub, the family alleged that Wilkes recommended a premium-financed indexed universal life insurance (IUL) strategy that relied on borrowed funds to support a market-linked insurance policy.
The claimants asserted that the strategy exposed the family to substantial risk while generating significant commissions for Wilkes. They sought more than $9.5 million in damages and alleged, among other claims, unsuitable recommendations, breach of fiduciary duty, negligence, and failure to supervise.
Wilkes and the claimants ultimately agreed to a stipulated award, avoiding a full evidentiary hearing. The arbitration panel determined that Wilkes was liable for $2.4 million in damages. However, the award was reduced by $150,000 to account for funds previously paid or agreed to by an insurance carrier on his behalf, resulting in a final payment obligation of $2.25 million.
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