The Logan Group Securities’ Past
In April 1996, The Logan Group became a member of the FINRA. The company is owned by one person, and its only branch office is in Roseville, California.
The only person on record for the business is its owner. The Logan Group helps teachers in the greater Sacramento area plan for their retirement. Respondent has never been in trouble with the law before.
The Securities Report from the Logan Group
This matter originated from FINRA’s 2018 cycle examination of the firm.
Variable Annuities
The Logan Group primarily sells mutual funds and variable annuities to educators
through salary deferred 403(b) accounts. The fn-m enters into selling agreements with
fund companies on the approved vendor list for Sacramento school districts. Variable
annuity sales accounted for approximately 80% of the firm’s business between October
2017 and September 2018.
Variable annuities are complex products that permit customers to choose from a variety
of contract features and options. Due to the complexity of variable annuities and
the inherent risk of sales practice violations they present, FINRA requires that firms enhance
their supervisory procedures and provide more comprehensive and targeted protection to
investors who purchase or exchange these products.
From October 2017 to September 2018, the Logan Group sold variable annuity contracts
with different share class options, including B shares and L shares. B-share contracts are
the most common share class sold in the industry and typically have a seven-year
surrender period. L-share contracts typically provide a shorter surrender period of three
to four years. The fees associated with an L-share contract are typically between 35 and
50 basis points higher annually than most B-share contracts. These fees are assessed as
long as the contract is held unless the contract provides for a “persistency credit.”1
Respondent Failed to Establish, Maintain, and Enforce Written Procedures for the
Sale of Multi-Share Class Variable Annuities
FINRA Rule 2330 requires that firms and representatives who recommend variable
annuities have a reasonable basis to conclude the proposed recommendations are suitable
and that the customers have been informed of various features of the variable annuities,
such as the potential surrender periods and surrender charges, potential tax penalties, and
potential charges for and features of riders.
FINRA Rule 3110(b) requires each member fn-m to establish, maintain, and enforce
written procedures to supervise the types of business in which it engages and to supervise
the activities of registered representatives, registered principals, and other associated
persons that are reasonably designed to achieve compliance with applicable securities
laws, regulations and rules of FINRA. Rule 3110(b) also requires member firms to
promptly amend written supervisory procedures to reflect changes in its supervisory
systems. 2
i Some L-share contracts have a specific provision called a “persistency credit,” which reduces the annual fees so
that the contract is comparable to a B-share contract after the product is held for a certain period, generally seven to
ten years. The L-share contract sold by the Logan Group had a slightly lower up-front commission than its B-share
counterpart.
2FINRA Rule 2010 requires a member firm, in the conduct of its business, to observe high standards of commercial
honor and just and equitable principles of trade. Violations of FINRA Rules 2330 and 3110 also constitute violations
of FINRA Rule 2010.
2 2
Variable Annuities
The Logan Group primarily sells mutual funds and variable annuities to educators
through salary deferred 403(b) accounts. The firm enters into selling agreements with
fund companies on the approved vendor list for Sacramento school districts. Variable
annuity sales accounted for approximately 80% of the firm’s business between October
2017 and September 2018.
Variable annuities are complex products that permit customers to choose among a variety
of contract features and options. Due to the complexity of variable annuities and the
inherent risk of sales practice violations they present, FINRA requires that firms enhance
their supervisory procedures and provide more comprehensive and targeted protection to
investors who purchase or exchange these products.
From October 2017 to September 2018, the Logan Group sold variable annuity contracts
with different share class options, including B shares and L shares. B-share contracts are
the most common share class sold in the industry and typically have a seven-year
surrender period. L-share contracts typically provide a shorter surrender period of three
to four years. The fees associated with an L-share contract are typically between 35 and
50 basis points higher annually than most B-share contracts. These fees are assessed as
long as the contract is held unless the contract provides for a “persistency credit.”1
Respondent Failed to Establish, Maintain, and Enforce Written Procedures for the
Sale of Multi-Share Class Variable Annuities
FINRA Rule 2330 requires that firms and representatives who recommend variable
annuities have a reasonable basis to conclude the proposed recommendations are suitable
and that the customers have been informed of various features of the variable annuities,
such as the potential surrender periods and surrender charges, potential tax penalties, and
potential charges for and features of riders.
FINRA Rule 3110(b) requires each member firm to establish, maintain, and enforce
written procedures to supervise the types of business in which it engages and to supervise
the activities of registered representatives, registered principals, and other associated
persons that are reasonably designed to achieve compliance with applicable securities
laws, regulations, and rules of FINRA. Rule 3110(b) also requires member firms to
promptly amend written supervisory procedures to reflect changes in its supervisory
systems.
From October 2017 through September 2018, the firm sold 25 variable annuities with
investments of over $25,000. Nineteen customers purchased 24 L-share contracts,
totaling approximately 2.8 million in sales. 3 During that period, the fn-m failed to
establish, maintain, and enforce written supervisory procedures related to the
recommendation and sale of different variable annuity share classes, specifically Lshares, which were the most common type of share class sold by the fn-m. Though it
prepared an update to its procedures, the firm failed to implement that update after it
advised FINRA that it would on January 29, 2016.
The Logan Group also advised FINRA on March 18, 2016, that it would document its
review of variable annuity options with customers by printing a document that reflected
the expense ratios of the different types of variable annuities. Upon sale, the firm said it
would have customers initial the printout to document that they had reviewed the expense
ratios of different variable annuities. The Logan Group failed to follow these procedures
for all 25 variable annuities it sold between October 2017 and September 2018.
During the same period, the Logan Group failed to enforce its written supervisory
procedures that required customers to complete a Variable Annuity Disclosure Form
prior to any variable annuity investment.
The Variable Annuity Disclosure Form highlighted various features of the annuity selected by the customer. From October 2017
through September 2018, the Logan Group changed its supervisory system to use forms
provided by annuity companies to describe features of the L-share contracts it
recommended to customers in lieu of Variable Annuity Disclosure Forms. The firm did
not amend its written supervisory procedures to reflect its new system, and it failed to
enforce the written procedure to have its L-share contract customers fill out the Variable
Annuity Disclosure Form. FINRA previously notified the firm of its failure to enforce
this written procedure, but the firm failed to modify its procedures or enforce the
procedures as written.
Finally, the Logan Group failed to collect the investment objective and risk tolerance
information for three L-share contract customers. While the firm’s customers are
primarily educators with similar incomes, investment objectives, and risk tolerances,
Rule 2330 requires firms to record customer information, such as investment objectives,
prior to recommending the purchase of variable annuities.
Therefore, Respondent violated FINRA Rules 2330, 3110(b), and 2010.
Penalties, punishments, and sanctions include:
a $15,000 fine.
Respondent promises to pay the monetary sanction once they are told that this AWC has been accepted and that the payment is due. Respondent has sent in a form called a “Election of Payment” that shows how it plans to pay the fine.
Respondent specifically and freely gives up any right to say that he or she can’t pay the monetary sanction in this case, either now or at any time after this AWC is signed.
Review of securities from the Logan Group
From October 2017 to September 2018, the Logan Group didn’t set up, keep up, or enforce written supervisory procedures that were meant to make sure they followed securities laws, regulations, and FINRA rules when recommending investments for multi-share class variable annuities. FINRA Rules 2330, 3110(b), and 2010 were broken because of this.
How to Spot a Fake Financial Advisor?
Help for people who have been victimized by Logan Group Securities
If you lost money because The Logan Group Securities lied to you, sold you bad investments, or gave you bad advice about how to spend. Then you can go to court and get what’s right. Fraud, bad behavior, and not doing what you’re supposed to do should not be taken easily, especially in this business. If your financial advisor or brokerage company doesn’t follow FINRA’s rules and regulations, you should tell the authorities or go to court.
Financial advisors are required by law and regulation to suggest to their clients the best investments and investment plans. Their suggestions should be in the best interest of their clients and fit with their goals and wants. In the same way, the brokerage company that hires financial advisors has a legal and regulatory duty to keep a close eye on and oversee their practices and behavior. They need to make sure that the financial expert isn’t trying to trick them or isn’t favoring certain investments for no good reason. If the financial advisor or brokerage company doesn’t do these things, the client or customer may be able to get all or some of their money back.
When they give advice about investments and investment plans, financial advisors need to think about what is best for their clients. Reasonable basis suitability means that the advisor should do their best to analyze and point out the risks and benefits of the investment or investment plan they recommend.
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