Initiated By
FINRA
Allegations
Lott was named a respondent in a FINRA complaint alleging that he knowingly and substantially aided and abetted an individual in engaging in the recommendation and sale of securities at a time when the individual was not registered with FINRA and not associated with any FINRA member firm, and the individual was not registered with the state of Utah where both the individual and the customers resided. The complaint alleges that at the individual's request, Lott agreed to serve as the registered representative of record for the annuity exchanges and to split with the individual the commissions paid by an insurance company, even though Lott knew that the individual was not registered. Instead of directly paying the individual his share of the commissions, Lott paid the individual's wife, in an effort to conceal his activity. Lott repeatedly facilitated the individual's efforts to continue acting as a securities broker, despite the individual's unregistered status, by effecting 26 exchanges of variable annuities and seven sales of mutual funds that the individual recommended to 13 customers to fund purchases of 33 fixed indexed annuities. By engaging in this conduct, Lott aided and abetted the individual's violation. The complaint also alleges that in order to effect the transactions, Lott falsely certified to his member firm on 10 firm suitability forms for nine different customers that he had discussed the benefits and costs of the transactions with the customers identified on the forms. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the transactions. By doing so, Lott caused his firm to maintain false books and records. The complaint further alleges that Lott made false statements on forms he submitted to the insurance company. For nine customers, he submitted 24 forms containing false certifications that he had discussed the appropriateness of the annuity replacement with the customers. On three forms for three different customers, Lott falsely represented that he had met in person with the customer when he had not. Further, on five forms for five different customers that Lott had not met or spoken with, Lott misrepresented that he had known the customer for at least one or two months. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the transactions.
Resolution
Decision & Order of Offer of Settlement
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$20,000.00
Sanctions
Suspension
Registration Capacities Affected
All capacities
Duration
Four months
Start Date
4/16/2018
End Date
8/15/2018
Regulator Statement
Without admitting or denying the allegations, Lott consented to the sanctions and to the entry of findings that he knowingly and substantially aided and abetted an individual in engaging in the recommendation and sale of securities at a time when the individual was not registered with FINRA and not associated with any FINRA member firm. Also, the individual was not registered with the state of Utah, where both the individual and the customers resided. The findings stated that for three investors who were not yet Lott's member firm customers, the individual submitted to an insurance company requests to exchange variable annuities for fixed indexed annuities issued by the company. The company rejected his request because he was not registered with FINRA at the time, which was necessary under Utah law to sell or make a recommendation to terminate a variable annuity contract. At the individual's request, Lott agreed to serve as the registered representative of record for the annuity exchanges and to split with the individual the commissions paid by an insurance company, even though Lott knew that the individual was not registered. Instead of directly paying the individual his share of the commissions, Lott paid the individual's wife, in an effort to conceal his activity. Lott repeatedly facilitated the individual's efforts to continue acting as a securities broker, despite the individual's unregistered status, by effecting variable annuities exchanges and mutual fund sales that the individual recommended to customers to fund fixed indexed annuities purchases. By engaging in this conduct, Lott aided and abetted the individual's violation. The findings also stated that in order to effect the transactions, Lott falsely certified to his firm on its suitability forms for different customers that he had discussed the benefits and costs of the transactions with the customers identified on the forms. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the relevant transactions. By doing so, Lott caused his firm to maintain false books and records. The findings also included that Lott made false statements on forms he submitted to the insurance company. Lott submitted forms containing false certifications that he had discussed the appropriateness of the annuity replacement with the customers. Lott also falsely represented on forms that he had met in person with the customer when he had not. Further, on forms for customers that Lott had not met or spoken with, he misrepresented that he had known the customer for at least one or two months. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the transactions.
Broker Comment
Without admitting or denying the allegations, Lott consented to the sanctions and to the entry of findings that he knowingly and substantially aided and abetted an individual in engaging in the recommendation and sale of securities at a time when the individual was not registered with FINRA and not associated with any FINRA member firm. Also, the individual was not registered with the state of Utah, where both the individual and the customers resided. The findings stated that for three investors who were not yet Lott's member firm customers, the individual submitted to an insurance company requests to exchange variable annuities for fixed indexed annuities issued by the company. The company rejected his request because he was not registered with FINRA at the time, which was necessary under Utah law to sell or make a recommendation to terminate a variable annuity contract. At the individual's request, Lott agreed to serve as the registered representative of record for the annuity exchanges and to split with the individual the commissions paid by an insurance company, even though Lott knew that the individual was not registered. Instead of directly paying the individual his share of the commissions, Lott paid the individual's wife, in an effort to conceal his activity. Lott repeatedly facilitated the individual's efforts to continue acting as a securities broker, despite the individual's unregistered status, by effecting variable annuities exchanges and mutual fund sales that the individual recommended to customers to fund fixed indexed annuities purchases. By engaging in this conduct, Lott aided and abetted the individual's violation. The findings also stated that in order to effect the transactions, Lott falsely certified to his firm on its suitability forms for different customers that he had discussed the benefits and costs of the transactions with the customers identified on the forms. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the relevant transactions. By doing so, Lott caused his firm to maintain false books and records. The findings also included that Lott made false statements on forms he submitted to the insurance company. Lott submitted forms containing false certifications that he had discussed the appropriateness of the annuity replacement with the customers. Lott also falsely represented on forms that he had met in person with the customer when he had not. Further, on forms for customers that Lott had not met or spoken with, he misrepresented that he had known the customer for at least one or two months. Lott made these false statements and submitted these false documents in order to conceal the individual's role in the transactions.
