$250,000 MassMutual Fine For Failure To Supervise Rogue Agent

The Massachusetts Securities Division (“Division”) has levied a $250,000 fine against MML Investors Services LLC (“MMLIS”), a MassMutual subsidiary, for failing to supervise an insurance broker and registered investment advisor, Charles J. Evan (“Mr. Evan”). In a separate complaint, the Division alleged that Mr. Evana defrauded clients by high-pressure sales tactics based on fraudulent misrepresentations about the clients buying inappropriate high-commission insurance and annuities products.

While the present fine for MMLIS’ failure to supervise Mr. Evan is significant, it pales in comparison with the $4.75 million fine MMLIS paid the Division ten months ago for failing to supervise its registered broker representatives. See Agency Checklists’ article of  October 4, 2021, “Sec. Of State Fines MassMutual $4.75 Million Over Social Media Persona “Roaring Kitty.

The Division’s separate complaint against Mr. Evan for restitution

With the filing of the Consent Order against MMLIS, the Division filed a separate complaint against Mr. Evan. This complaint sought to require Mr. Evan to provide a verified accounting of his profits, to return all profits and direct or indirect compensation and remuneration acquired as a result of his wrongdoing; and for him to compensate his clients for any losses they suffered as a result of his fraudulent actions.

In the Division’s complaint against Mr. Evan, the Division alleged, in part, that:

  • “Mr. Evan perpetrated a deceptively simple scheme for almost ten years by subjecting his clients to high-pressure boiler room sales tactics and outright fraudulent misstatements, misrepresentations, and omissions while advising those clients to purchase high commission products intended solely to generate large profits for himself.”
  • “Throughout this period, Mr. Evan collected thousands of dollars in annual fees from his clients in exchange for his investment advice, financial planning, and consulting services while preying upon the trust that his clients placed in him.”
  • “Mr. Evan repeatedly disguised his recommendations that clients purchase products as part of his investment advice and financial planning for the clients, but in reality, Mr. Evan sought to generate profits for himself in his capacity as a broker-dealer agent by soliciting them to purchase illiquid products with large, undisclosed commissions.”
  • “During meetings and phone conversations over the span of many years, Mr. Evan used high-pressure sales tactics in connection with many of his recommendations to customers to purchase variable annuities and life insurance policies. Mr. Evan repeatedly called and met clients in person, utilizing angry and belligerent tones and language intended to overcome his clients’ reluctance to purchase the products he recommended.”
  • “As part of this process, Mr. Evan also advised that clients liquidate assets from their retirement accounts in order to fund additional, unnecessary life insurance policy purchases as investment vehicles. On many occasions, Mr. Evan told his clients that he made no money in connection with their life insurance policies and often characterized the policies as easy to resell should they need additional assets in a timely manner.”

MMLIS failed to supervise Mr. Evan

The Consent Order alleged, which MMLIS neither admitted nor denied, that:

  • MMLIS’ written supervisory procedures failed to ensure that Mr. Evan made accurate disclosures concerning his compensation for providing investment advice
  • “By failing to meaningfully enforce its written supervisory procedures, MMLIS failed to prevent Mr. Evan from pressuring clients to purchase additional high-commission products and pay additional premiums into existing variable annuities.
  • MMLIS failed to ensure that Mr. Evan disclosed to his clients that he earned thousands of dollars in commissions in connection with his recommendations that clients invest additional premiums into their variable annuities.

The revocation of the agent’s registration with MMLIS and FINRA

On October 28, 2019, MMLIS canceled Mr. Evan’s registration based on an internal investigation into the customer claims made against him.

On November 13, 2019, the Financial Industry Regulatory Authority (“FINRA”) opened an investigation into Mr. Evan following the cancellation of his registration. Mr. Evan declined to provide the information and papers that FINRA had sought. FINRA permanently disqualified Mr. Evan from any security sales registration on January 22, 2020, which Mr. Evan accepted by submitting a Letter of Consent.

Mr. Evan takes the Fifth

On November 19, 2020, Mr. Evan received a subpoena from the Secretary of State’s Enforcement Section ordering him to come and provide an official statement to the Massachusetts Securities Division. Mr. Evan appeared on January 14, 2021, but he declined to answer any questions, citing the Fifth Amendment’s protection against self-incrimination.

The $1 million in settlements for Mr. Evan’s wrongful acts

Also, the FINRA website listed eight settlement awards in this 2019-2020 time frame against Mr. Evan, These settlements totaled $1,053,359.43

The complaints involved in these awards included:

  1. An allegation that in 2015, a signature was forged on paperwork related to the transfer of ownership of a term life policy. – Settlement $250,000.00
  2. An allegation that Mr. Evan used unethical sales tactics by denying receiving commissions, and omitted information to secure the sale of financial products beginning in 2013.  – Settlement $84,928.83
  3. An allegation that Mr. Evan, beginning in 2008, made misrepresentations and provided bad investment advice on the sales of various products, which resulted in a financial loss. – Settlement $197,500.00
  4. An allegation that after meeting with Mr. Evan in 2017, he sold her several variable annuities that were found to be unsuitable for her needs. – Settlement $29,250.00
  5. An allegation that signatures related to various accounts and policies sold to them by Mr. Evan in or around 2012 are not theirs. – Settlement $250,000.00
  6. An allegation that Mr. Evan used unethical sales tactics by denying he received commissions, omitted information, and forged his clients’ signatures and initials on forms to secure the sale of financial products beginning in 2013. – Settlement $80,180.68
  7. An allegation that Mr. Evan, beginning in 2016, made misrepresentations and unsuitable recommendations on the sale of life insurance and annuity products. – Settlement $130,000.00
  8. An allegation that Mr. Evan, beginning in 2015, made misrepresentations and unsuitable recommendations on the sale of life insurance and variable annuity products. Mr. Evan’s clients also alleged that Mr. Evan misled them about advisory fee charges, in addition to commissions paid on the variable annuity products. – Settlement $31,500.00
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