Initiated By
FINRA
Allegations
Holloway was named a respondent in a FINRA complaint alleging that as the sole registered representative and owner of his member firm, he recommended that customers exchange one deferred variable annuity contract (VA) for another without having a reasonable basis for the recommendations. The complaint alleges that Holloway failed to conduct a meaningful comparative analysis of the costs, features, and benefits of the surrendered and newly acquired VAs. In addition, Holloway placed clients whose VA exchanges incurred a surrender charge into a more expensive company VA with a "bonus feature" without considering whether the VA with the bonus feature was in fact suitable. The complaint also alleges that Holloway falsified or inappropriately altered VA transaction paperwork. Holloway had clients sign uncompleted paperwork that he and his assistant filled in later and/or photocopied for use in other transactions. Holloway also forged or directed his assistant to forge client initials to make changes to paperwork. In addition, by modifying the pre-signed forms and forging initials on documents, Holloway caused his firm to create and maintain inaccurate books and records. The complaint further alleges that Holloway directed his assistant to impersonate clients and employees of an insurance company in telephone conversations regarding VA transactions. Holloway himself pretended to be an insurance company employee to obtain information from his clients' medical providers in connection with life insurance sales. In addition, the complaint alleges that Holloway directed his assistant to complete insurance continuing education classes for him so that he could meet his Maryland insurance licensing requirement. Holloway was able to retain his state insurance license and sell variable annuities because his assistant completed continuing education courses. Moreover, the complaint alleges that Holloway filed a Uniform Application for Investment Adviser Registration (Form ADV) in which he willfully made false statements, creating the false appearance that he maintained an active business of providing financial planning services. Section 207 of Investment Advisers Act of 1940 makes it unlawful to willfully make any untrue statement of material fact in any registration application or report filed pursuant to that Act. Furthermore, the complaint alleges that Holloway deliberately withheld most of the documents requested by FINRA until it learned of their existence and confronted Holloway about them, and he altered documents before they were produced to FINRA.
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
5/29/2019
Sanctions
Monetary Penalty other than Fines
Amount
$7,768.26
Regulator Statement
Amended Hearing Panel decision rendered April 11, 2019. The sanctions are based on findings that Holloway failed to meaningfully compare the benefits, fees, and surrender costs associated with variable annuities being exchanged, or document any suitability analysis, in connection with variable annuity exchanges. The findings stated that Holloway recommended that his clients shift their investments from one annuity to another at a cost, despite the similar features of the two products. To justify the substantial surrender costs incurred as a part of the transactions, Holloway recommended to several clients that surrender costs would be offset by the bonus feature of the new annuity, when in fact the bonus feature came at the price of increased annual fees for the client. As a result of these switches, Holloway earned $214,989 in commissions, while his clients paid a total of $114,470 in surrender fees. By failing to account for the costs associated with the bonus, Holloway demonstrated a lack of adequate and reasonable understanding of the investment before recommending the exchange transaction. The findings also stated that Holloway misused and falsified documents in connection with variable annuity exchanges. Holloway caused customers to sign blank application documents and later either he or his secretary filled out the blank areas of the forms and then submitted the documents for processing without further review by the customer. Holloway also obtained a signed, uncompleted application for an annuity exchange and photocopied that signature page for use in other transactions for that customer. Holloway, or his secretary acting at his direction, entered customer initials next to changes made to forms returned by insurance companies for incorrect or missing information without written authorization. The findings also included that Holloway directed his secretary to impersonate clients on telephone calls to financial institutions to facilitate fund transfers for variable annuity purchases, and Holloway claimed to be an employee of an insurance company on a phone conversation when seeking medical information to facilitate insurance policy purchases. FINRA found that Holloway claimed credit for several continuing education courses necessary for his license to sell variable annuities in the state of Maryland, while in fact his secretary completed the coursework. FINRA also found that Holloway filed a Uniform Application for Investment Adviser Registration (Form ADV) overstating his adviser activity. The Form ADV claimed that he provided investment advisory services for as many as 250 clients and financial planning services for up to 50 clients in the prior year, reflecting as much as $5 million in investments. In fact, Holloway had no investment advisory clients, provided no fee-based financial planning, and had made no investments along those lines for several years. In addition, FINRA found that Holloway withheld documents and produced falsified documents in connection with a FINRA investigation. The decision became final on May 29, 2019.
