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Variable annuities are a form of life insurance that includes a lump-sum death benefit and one or more tax-deferred investments, often mutual funds, which are supposed to provide income during a client's lifetime. They can be particularly lucrative for insurers because of high upfront commissions, plus ongoing “trailer” commissions and the underlying fees for the mutual funds included in them.

However, high surrender fees, high administrative costs and commisions and a variable return rate dependent on the stock market may cause investors in these products significant and unneccessary losses. Furthermore, while variable annuities may be appropriate for investors who can maintain the investment for twenty or thirty years, older investors often sustain losses as their remaining years are ususally much fewer. Because these annuities are not liquid, the elderly often pay hefty fees when they need to access their own monies. Worse still, many of the elderly who purchase them do so because they are told they are safe investments. There is recent scrutiny of variable annuity sales practices by the NASD and others.

Recently, Forbes reported that Morgan Stanley had been served earlier with a subpoena by Massachusetts Secretary of the Commonwealth William Galvin seeking details of its variable annuity sales, including revenue-sharing arrangements, compensation, whether the products receive preferred sales treatment, commission schedules, prospectuses and documents for internal use only. A recent lawsuit claims that variable annuity underwriters and Morgan Stanley maintained “secret contingent fee sharing arrangements” in which a portion of commission revenue was paid to the brokerage as an incentive to sell the product, and limited its variable annuity sales to underwriters who participated in fee-sharing deals. The suit further claims that Morgan Stanley brokers received bonuses based on sales volume and that the prospectuses Morgan Stanley provided clients included “misreprentations and omissions” of its financial interests.

The lawsuits come at a particularly sensitive time for Morgan Stanley and the brokerage industry which recently came through a separate pay-to-play scandal involving mutual funds. Only 14 months ago Morgan Stanley agreed to pay $50 million in a Securities and Exchange Commission settlement charging it with failing to disclose to its mutual fund clients that its brokers were receiving extra payments to sell certain products.

In May of 2003, the National Association of Securities Dealers (NASD) issued an alert regarding Annuities Fraud:

"The marketing efforts used by some variable annuity sellers deserve scrutiny — especially when seniors are the targeted investors. Sales pitches for these products might attempt to scare or confuse investors. One scare tactic used with seniors is to claim that a variable annuity will protect them from lawsuits or seizures of their assets. Many such claims are not based on facts, but nevertheless help land a sale.

"While variable annuities can be appropriate as an investment under the right circumstances, as an investor, you should be aware of their restrictive features, understand that substantial taxes and charges may apply if you withdraw your money early, and guard against fear-inducing sales tactics."

We are dedicated to aggressively recovering annuities losses and stock market losses caused by brokerage firms and investment counselors.

LET US EVALUATE YOUR CASE

As a securities law firm dedicated to helping public investors obtain compensation from stockbrokers, financial advisers and insurance salesmen, we will gladly give you a free email consultation and opinion about the likelihood of success of your claim. Just fill out the questionnaire below and email us, and an experienced securities lawyer will respond to you. Answer as many questions as you can. The more information we have, the better we can advise you. First Name Last Name Address   City State Zip Code E-Mail Address Telephone Age Under 30 30-40 40-50   50-60 60-70 over 70 Name of Brokerage Firm In Question Name of Broker Location of Firm What were your investment objectives? Long term growth Speculation Income return Conservative     How much did you lose? Under $50,000 Between $50,000 to $150,000 Between $150,000 to $500,000 Between  $500,000 to $1,000,000  Between  $1,000,000 to $5,000,000 Between  $5,000,000 to $10,000,000 Over $10,000,000     How many years ago did the loss occur? Less than one year.  Between one year and four years. Between four and six years ago.  More than six years ago.     If the attorneys feel I have a meritorious claim, I may be willing to file an action to recover my losses. Yes    No Include any additional information or comments that may help us in reviewing your questionnaire By submitting this form, I am stating that all information provided is honest and accurate to my best recollection. By no means does this form constitute a contract for action.

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