SEC Files Fraud Charges Against Former Brokers Targeting Federal Retirees
Four former Atlanta-area brokers—Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, and Brandon P. Long—along with their firm Federal Employee Benefits Counselors, defrauded federal employees by misleading them into rolling over $40 million from their TSP accounts into high-fee variable annuities, falsely claiming government affiliation and concealing fees, earning $1.7 million in commissions, and now face SEC charges seeking disgorgement, penalties, and injunctions.
The SEC charged four brokers and their firm, Federal Employee Benefits Counselors, with defrauding federal employees by inducing approximately $40 million in TSP rollovers into privately issued variable annuities with hidden fees and no government backing. The brokers falsely implied federal affiliation, used altered or incomplete transaction forms, and omitted the term 'variable annuity' from marketing materials to deceive investors aged 59½ and older, earning $1.7 million in commissions from roughly 200 sales. They are charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, with the SEC seeking disgorgement of ill-gotten gains plus interest, civil penalties, and permanent injunctions as part of its ReTIRE initiative.
The SEC charged four former Atlanta-area brokers—Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, and Brandon P. Long—and their firm, Federal Employee Benefits Counselors, with orchestrating a fraud targeting federal employees nearing retirement by misleading them into rolling over $40 million from their Thrift Savings Plan (TSP) accounts into high-fee, privately issued variable annuities. The brokers falsely suggested government endorsement or affiliation, claiming their products were vetted or selected by the TSP, when in fact they had no connection to the federal government, and deliberately excluded the term 'variable annuity' from marketing materials to obscure the nature of the investments. They used modified or incomplete transaction forms and fabricated written materials to deceive investors, concealing the true fees, lack of TSP oversight, and the fact that funds would be processed through a private brokerage firm they controlled. Collectively, the brokers earned approximately $1.7 million in commissions from roughly 200 such sales, primarily targeting retirees aged 59½ and older. The SEC alleges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and is seeking disgorgement of all ill-gotten gains with interest, civil penalties, and permanent injunctions to prevent future misconduct. This case is part of the SEC’s ReTIRE initiative and Broker-Dealer Task Force efforts to combat financial exploitation of senior and retirement investors. The agency also issued a public alert warning that the TSP never contacts retirees to solicit personal information or recommend third-party investment services.
Exhibits & Attached Documents (1)
Extracted insights
- $40.00M $40 million $10M–$100M
- $1.70M $1.7 million $1M–$10M
- person aaron w. lipson
- agency associate director of sec's atlanta regional office
- agency director of sec's office of investor education and advocacy
- person federal employee benefits counselors
- person lori schock
- agency Securities and Exchange Commission
- SEC charged Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, Brandon P. Long
- Four Former Atlanta-Area Brokers fraudulently induced Federal Employees To Roll Over TSP Holdings Into Variable Annuities
- Federal Employee Benefits Counselors targeted Federal Employees Nearing Retirement With Sizable TSP Funds
- Brokers sold Approximately 200 Variable Annuities With Total Face Value Of $40 Million
- Brokers earned Approximately $1.7 Million In Commissions
- Brokers misled Investors Concerning Fees And Guaranteed Investment Returns
- Brokers fostered Misleading Impression Of Affiliation With Federal Government
- Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, Brandon P. Long violated Section 17(a) Of Securities Act Of 1933, Section 10(b) Of Securities Act Of 1934, Rule 10b-5
- SEC seeks Disgorgement Of Ill-Gotten Gains Plus Interest And Penalties And Permanent Injunctions
- Aaron W. Lipson is Associate Director Of SEC's Atlanta Regional Office
- Lori Schock is Director Of SEC's Office Of Investor Education And Advocacy
- Antonia Chion, Andrew M. Calamari lead Broker-Dealer Task Force
The Securities and Exchange Commission today charged four former Atlanta-area brokers with fraudulently inducing federal employees to roll over holdings from their federal Thrift Savings Plan (TSP) retirement accounts into higher-fee, variable annuity products. The SEC’s enforcement action comes at a time when the agency has been focusing more specifically on brokers’ and advisers’ interactions with senior investors, and others investing for retirement, through the ReTIRE initiative of the agency’s national exam program and the work of the Broker-Dealer Task Force in its Enforcement Division. The SEC’s complaint charges an entity called Federal Employee Benefits Counselors through which the brokers targeted federal employees nearing retirement with sizable funds invested in the TSP. The complaint alleges that the brokers misled investors concerning significant details about the recommended variable annuity investment, including the associated fees and guaranteed investment returns. The brokers allegedly fostered the misleading impression that they were in some way affiliated with or approved by the federal government. In some instances, investors were led to believe that their funds would be invested in a product that was offered, vetted, or specifically selected by the TSP. According to the SEC’s complaint, the brokers sent investors incomplete or modified transaction forms as well as written materials they devised that obscured that the investment was a privately issued variable annuity with no connection to the TSP and would be processed through a private brokerage firm with which the brokers were associated. The brokers sold approximately 200 variable annuities with a total face value of approximately $40 million to federal employees, who used monies rolled over from their TSP accounts to fund their purchases. The brokers collectively earned approximately $1.7 million in commissions on these sales. “As alleged in our complaint, these brokers were motivated by the prospects of higher commissions as they targeted federal employees age 59½ and over and intentionally obscured important details when recommending variable annuity purchases. They even allegedly excluded the words ‘variable annuity’ from some materials they shared with TSP account holders,” said Aaron W. Lipson, Associate Director of the SEC’s Atlanta Regional Office. The SEC today issued an investor alert stressing that the TSP will never contact federal employees asking them to provide sensitive personal information and does not authorize third parties to provide counseling or investment-related services. “Be skeptical if someone offers you an investment opportunity and claims to be affiliated with the federal government,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. The four former brokers charged in the SEC’s complaint are Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, and Brandon P. Long. The complaint charges them and Federal Employee Benefits Counselors with violating and aiding and abetting violations of some or all of the provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Act of 1934, and Rule 10b-5. The SEC seeks disgorgement of ill-gotten gains plus interest and penalties and permanent injunctions. The SEC’s Atlanta office conducted the investigation and will lead the litigation. The Broker-Dealer Task Force is led by Antonia Chion and Andrew M. Calamari.
The Securities and Exchange Commission today charged four former Atlanta-area brokers with fraudulently inducing federal employees to roll over holdings from their federal Thrift Savings Plan (TSP) retirement accounts into higher-fee, variable annuity products. The SEC’s enforcement action comes at a time when the agency has been focusing more specifically on brokers’ and advisers’ interactions with senior investors, and others investing for retirement, through the ReTIRE initiative of the agency’s national exam program and the work of the Broker-Dealer Task Force in its Enforcement Division. The SEC’s complaint charges an entity called Federal Employee Benefits Counselors through which the brokers targeted federal employees nearing retirement with sizable funds invested in the TSP. The complaint alleges that the brokers misled investors concerning significant details about the recommended variable annuity investment, including the associated fees and guaranteed investment returns. The brokers allegedly fostered the misleading impression that they were in some way affiliated with or approved by the federal government. In some instances, investors were led to believe that their funds would be invested in a product that was offered, vetted, or specifically selected by the TSP. According to the SEC’s complaint, the brokers sent investors incomplete or modified transaction forms as well as written materials they devised that obscured that the investment was a privately issued variable annuity with no connection to the TSP and would be processed through a private brokerage firm with which the brokers were associated. The brokers sold approximately 200 variable annuities with a total face value of approximately $40 million to federal employees, who used monies rolled over from their TSP accounts to fund their purchases. The brokers collectively earned approximately $1.7 million in commissions on these sales. “As alleged in our complaint, these brokers were motivated by the prospects of higher commissions as they targeted federal employees age 59½ and over and intentionally obscured important details when recommending variable annuity purchases. They even allegedly excluded the words ‘variable annuity’ from some materials they shared with TSP account holders,” said Aaron W. Lipson, Associate Director of the SEC’s Atlanta Regional Office. The SEC today issued an investor alert stressing that the TSP will never contact federal employees asking them to provide sensitive personal information and does not authorize third parties to provide counseling or investment-related services. “Be skeptical if someone offers you an investment opportunity and claims to be affiliated with the federal government,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. The four former brokers charged in the SEC’s complaint are Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood, and Brandon P. Long. The complaint charges them and Federal Employee Benefits Counselors with violating and aiding and abetting violations of some or all of the provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Act of 1934, and Rule 10b-5. The SEC seeks disgorgement of ill-gotten gains plus interest and penalties and permanent injunctions. The SEC’s Atlanta office conducted the investigation and will lead the litigation. The Broker-Dealer Task Force is led by Antonia Chion and Andrew M. Calamari.