Securities Arbitration Lawyer Blog
The Financial Industry Regulatory Authority (“FINRA”) has suspended financial advisor Lisa Ann Brumm (also known as Lisa Am Brumm and Lisa Ann Moon) from the securities industry for six months and fined her $7,500. Lisa Brumm was registered with Woodbury Financial Services, Inc. in Portland, Oregon, from April 2017 until December 2020. She was previously registered with AXA Advisors, LLC (now known as Equitable Advisors LLC) from July 2011 to May 2017. Ms. Brumm is also the CEO and founder of My Financial Girlfriend (Moon & Bear LLC).
FINRA suspended Ms. Brumm for recommending two unsuitable variable annuities to a customer, borrowing $40,000 from the same customer, and negligently misrepresenting the effect of a withdrawal from a variable annuity to another customer.
If you have suffered financial losses investing with Lisa Brumm or suspect that Ms. Brumm did not have your best interest in mind when recommending investments, annuities, or annuity switches, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account or annuity contract.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as AXA Advisors, LLC and Woodbury Financial Services, Inc.
FINRA Letter of Acceptance, Waiver, and Consent No. 2019062286101
Lisa Brumm and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 3, 2021, over her conduct from December 2016 to April 2017, while employed by AXA Advisors, LLC (now known as Equitable Advisors LLC).
Unsuitable Variable Annuity Recommendations
According to FINRA, in December 2016, Ms. Brumm recommended two unsuitable variable annuities totaling $400,000 to a customer. Specifically, FINRA alleged:
- In December 2016, Ms. Brumm recommended that a customer invest a total of $400,000 into two deferred variable annuities and purchase a guaranteed minimum death- and income benefit rider associated with one of them.
- Brumm lacked a reasonable basis to believe that the customer would benefit from the features of deferred variable annuities or that the particular deferred variable annuities, including the rider, were suitable for the customer.
- At the time, the customer was 28 years old, in the 15 percent tax bracket, and starting her own business.
- The customer’s time horizons for the two deferred variable annuity contracts—seven and fifteen years—were too short for the customer to achieve tax deferral benefits without subjecting herself to tax penalties.
- The customer’s financial goals also did not include annuitization. Because the income-benefit feature of the rider provided a guaranteed minimum annuitization value, and only after fifteen years, it was not suitable for the customer.
- The customer, who had no dependents, also did not have financial needs that would have been served by the death benefit feature of the rider.
A variable annuity is a contract between an investor and an insurance company, through which the insurance company makes periodic payments to the investor or a beneficiary designated by the investor. A variable annuity serves as an investment account that may grow on a tax-deferred basis, includes insurance features, and offers the investor periodic income payments. Variable annuities allow customers to choose from a complex array of contract features and investment options, including various share classes and optional riders. Each variable annuity is unique. The investor pays extra for the features offered by variable annuities.
Variable annuities can help investors meet retirement or other long-term goals. However, variable annuities are not suitable for all investors, especially for investors with short-term needs or objectives. Variable annuities are complex and can be costly due to fees or taxes and surrender charges that may apply if money is withdrawn early. Variable annuities also involve investment risks and include contract fees. Accordingly, financial advisors must exercise particular care to ensure that the purchase or exchange of variable annuity is suitable for a customer before recommending the product to a customer.
FINRA Rule 2111 requires that all investment recommendations be in the best interest of the customer. FINRA Rule 2330 provides investors with additional protections related to annuities. The rule requires that when a financial advisor recommends an exchange of a variable annuity, the financial advisor must consider whether the customer would incur a surrender charge, be subject to a new surrender period, lose existing benefits (such as death, living, or other contractual benefits), or be subject to increased fees or charges (such as mortality and expense fees, investment advisor fees, or charges for riders and similar product enhancements).
Borrowing from a Customer
In addition to recommending the two unsuitable variable annuities to her 28-year-old customer, FINRA also alleged that she borrowed $40,000 from the same customer.
FINRA Rule 3240 prohibits brokers from borrowing money from a customer unless, among other things, the member firm has written procedures allowing the borrowing, and the broker complies with certain notice requirements.
FINRA alleged that on April 11, 2017, Ms. Brumm entered into an oral agreement to borrow $40,000 from her customer. At the time, Ms. Brumm was registered through AXA Advisors, LLC. AXA Advisors, LLC’s written procedures did not permit Ms. Brumm to borrow from her customer. In September 2017, Ms. Brumm and the customer reduced their agreement to writing in the form of a promissory note, and in November 2017, Ms. Brumm repaid the loan with the $2,000 of agreed-upon interest.
Negligent Misrepresentation
According to FINRA, in February 2017, Ms. Brumm negligently misrepresented to another customer the effect of a withdrawal from a variable annuity. Specifically, FINRA alleged:
- In January 2017, a customer approached Ms. Brumm about withdrawing $20,000 from a variable annuity that had a value of approximately $22,000.
- At the time, the customer received $561 each month from the variable annuity through a systematic payment.
- To assist the customer in deciding whether to withdraw the funds, Ms. Brumm offered to determine whether the withdrawal would affect the monthly payments.
- In early February 2017, Ms. Brumm misrepresented to the customer that the withdrawal would reduce the monthly payments to $290 per month but would not eliminate them.
- Brumm should have known that the customer would not continue to receive monthly payments of $290.
- Based on Ms. Brumm’s misrepresentation, the customer went forward with the withdrawal.
- Under the customer’s contract, the withdrawal had the effect of stopping all systematic monthly payments.
- The customer also incurred about $600 in charges and fees associated with the withdrawal.
- She subsequently entered into a settlement with AXA Advisors, LLC that made her whole for her losses.
AXA Advisors, LLC & Woodbury Financial Services, Inc.: A Duty to Supervise
Financial institutions, like AXA Advisors, LLC and Woodbury Financial Services, Inc, must properly supervise financial advisors and customer accounts. Brokerage firms are required to establish and maintain a reasonably designed system to oversee account activity, such as mutual fund switches and the improper use of discretion, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.
How to Recover Losses or Obtain a Free Consultation
If you have suffered financial losses investing with Lisa Brumm or suspect that Ms. Brumm did not have your best interest in mind when recommending investments, annuities, or annuity switches, contact New York securities arbitration lawyer August Iorio of Iorio Altamirano LLP at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.