The Daily Brief
William Galvin
William Galvin

Metlife, Cape Cod Advisor Caught in Massachusetts’ Crosshairs

The Bay State’s securities regulator has been busy this week.

Secretary of the Commonwealth of Massachusetts William Galvin announced two separate actions Wednesday against Metlife, which failed to make pension payments to retirees the firm presumed dead, and Francis Weller Jr., a Cape Cod investment advisor who ran a scheme with Stifel, Nicolaus & Company and one of the firm’s brokers.

Galvin ordered Metlife to pay a fine of $1 million and provide back payments to hundreds of retirees that the firm wrongly thought were dead. These retirees earned pensions at their former employers, which are now defunct, and when those businesses closed down, their pension obligations were sold to Metlife.

Galvin’s office found the majority of the retirees affected within two months of starting its investigation, and about half of them were still living at the same addresses Metlife had on file.

“MetLife acquired the obligation to pay the employees’ pensions from their former employers, which sold their pension obligations to MetLife,” the order said. “This made MetLife responsible for paying the companies’ former employees under a Group Annuity Contract. MetLife was required to keep funds in reserve for these retirees and to make payments when the former workers came of age.”

In June, Galvin accused MetLife of defrauding investors by wrongfully releasing reserves to boost its bottom line instead of making pension payments to hundreds of retirees in that state.

In a separate action, Galvin charged advisor Weller of Weller Asset Management, with violating their fiduciary duty and failing to disclose conflicts of interest. According to the complaint, the advisor was running a scheme with a Stifel broker to share clients. The broker was receiving commissions for stock recommendations in clients’ trading accounts, and in exchange, Weller had access to Stifel’s resources.

Over a five-year period, clients paid over $1 million in commissions to the broker/dealer, while Weller was also charging his advisory fee. The conflict was never disclosed to Weller’s clients, Massachusetts claims.

“Essentially, [Weller Asset Management] clients were overpaying for services they could have received elsewhere at a much lower cost,” the complaint says.

For Weller, the state is seeking disgorgement of profits received from wrongdoing, an administrative fine and revocation of his registration as an advisor in the state. Stifel agreed to a fine of $300,000.

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