FINRA’s Department of Enforcement investigated Worth Financial’s business activities between July 2008 and April 2011 and alleged it failed to establish and maintain an adequate system to monitor, supervise, and control its registered representatives and non-associated individuals’ sale of life settlement investments. According to FINRA, Worth Financial was listed as the first generation licensee on 27 different fractional interests in life settlements issued by Life Partners, Inc. (“LPI”) during the relative time period. The LPI life settlement investments entitled Worth Financial to override commissions, which ranged from 0.05% to 2% of life settlement sales made by all of its licensees.
FINRA alleges that of the 27 LPI licensees Worth Financial received override commissions, only six of them were registered representatives associated with Worth Financial. According to FINRA, Worth Financial did not exercise any supervisory authority over the other 21 LPI licenses that sold by non-associated licensees. As a result, Worth Financial did not perform any background checks on the non-associated licensees and also failed to determine the states where the non-associated licensees sold life settlements. The latter supervisory failure is significant because states treat life settlements differently according to whether they are considered securities or not.
Based upon the foregoing conduct, FINRA alleged Worth Financial violated NASD Rules 3010(a) and (b), 2110, as well as FINRA Rule 2010. Specifically, NASD Rule 3010(a) requires each member to establish and maintain a system of supervision that is reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable NASD and FINRA Rules. Here, FINRA alleged Worth Financial failed to establish and maintain an adequate system to monitor, supervise, and control its registered representatives and non-associated individuals’ sale of life settlement investments, which constituted a violation of financial industry rules and regulations.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you lost money investing in LPI life settlement investments through Worth Financial, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.