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Minnesota Foundation Alleges Fraud, Sues Broker for Mismanaging Annuities

As an experienced financial analyst and legal expert, I can’t overstate the seriousness of the case. Allegedly, a former financial advisor from Principal Securities violated Minnesota law by ‘churning’ variable annuities—in simple terms, unnecessarily driving up client costs with frequent trading for their own gain.

The implications of such practices are severe, impacting investors substantially. To put it bluntly, when an advisor places personal interests above the client’s, there is potential for immense financial damage. The Legacy of Angels Foundation, now operating as Rosenau Family Research Foundation, seems to believe so, estimating a possible loss of $3,000,000 to $5,000,000 due to these allegations of fraudulent activity.

  • Case Information: The lawsuit was filed in accordance with Securities and Exchange Commission (SEC) guidelines. Notifications about it can be found in the Annual Reports’ Notes to Financial Statements, section six. The Foundation claims the financial advisor violated federal securities laws, breached fiduciary duties, infringed FINRA rules, and breached contract, among other allegations.
  • Impact on Investors: These alleged wrongdoings can lead to financial instability and a shaken confidence for investors, both those directly involved and others dealing with Principal Securities as well. Ensuring reliability and trustworthiness in those handling your hard-earned money is paramount.

Background: Principal Securities and the Accused Advisor

To gain a deeper understanding of the situation, I researched Principal Securities. Based in Des Moines, Iowa, this broker-dealer operates branches nationwide. According to my findings, the company had experienced 16 Regulatory Events and two arbitrations before this ongoing case.

The unfortunate reality is that even prestigious broker-dealers can attract bad eggs. This recent case adds to that roster, tagging along a series of alleged misconduct by one of their financial advisors. I urge you to check the advisor’s FINRA CRD number, a public database serving as a treasure trove of information about the advisor’s regulatory history, disputes, and customer complaints.

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FINRA Rule Simplified

To put it simply, the Financial Industry Regulatory Authority’s (FINRA) rules work as a safety net, protecting your financial interactions with stockbrokers. These rulings require advisors to report customer disputes, personal financial matters, and regulatory sanctions, enforcing transparency between both parties.

The alleged violations of these rules underscore the broker’s supposed deceitful behavior, further indicating a potential disregard for client trust and the robust regulatory framework put in place to protect investors.

Consequences and Lessons Learned

As Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” This succinctly summarizes the situation at hand and the aftermath of such allegations. The consequences are not just limited to materialistic aspects but also scar the trust essential in the financial world.

This case affirms the importance of vigilant research when selecting a financial advisor. Remember, even advisors associated with esteemed firms can exhibit questionable behavior. It’s imperative to remain proactive in safeguarding your investments by regularly checking your advisor’s performance and regulatory history.

Final Thoughts

Financial fraud is more common than we’d like to think. A 2017 study by E*TRADE found that 5% of Americans suspect their financial advisor engaged in illegal activity. While this might seem small, it translates into millions of dollars siphoned off by those who should be trusted allies in our financial journeys.

This case reminds all investors of the importance of diligent scrutiny in choosing and monitoring financial advisors. It also serves as a stark warning to industry insiders that illicit behavior will eventually be exposed.

Remember, knowledge is power, and understanding the complexities of the financial world empowers us to make better decisions for our futures.

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