William Galvin, secretary of the Commonwealth of Massachusetts, sued Securities America on Wednesday, claiming the firm failed to adequately supervise an advisor who used misleading advertising while prospecting elderly clients.
According to complaints filed by the Massachusetts Securities Division against both Securities America and Barry Graham Armstrong, the Needham, Mass.-based advisor pulled a “bait and switch” advertising campaign that the firm allegedly approved.
Armstrong, who is head of Armstrong Advisory Group, placed radio ads last summer allegedly promoting himself as a resource on Alzheimer's and urging consumers to call a hotline for more information and help. Armstrong hired a service to collect the information from consumers who called in and then hired telemarketers to call these potential clients back with information about Armstrong’s advisory services, according to the regulator.
“The agent pulled a ‘bait and switch,’ falsely advertising one service to obtain contact information, and switching it out for another—financial services,” the complaint contends.
The regulator claims that Armstrong submitted each ad to Securities America for compliance review and that the firm approved them without any substantive comment or follow up of any kind.
“Securities America’s failure to raise a single question about the content of the Alzheimer's ads…represents an utter failure that goes to the very purpose of a compliance function; Securities America failed to prevent or even flag glaringly unethical conduct,” the complaint said.
Securities America said on Wednesday it disagreed with the Massachusetts Securities Division’s enforcement action and “will vigorously defend against the allegations brought,” according to a statement provided by Janine Wertheim, senior vice president and chief marketing officer for the firm.
The Massachusetts Securities Division is seeking sanctions and orders censuring both Securities America and Armstrong for their conduct.