Illinois Securities Department Order in the Matter of Senior Financial Strategies, Inc.

By Jim Poolman

On May 24, 2011, the Illinois Securities Department issued an order against Senior Financial Strategies, Inc. d/b/a Pinnacle Investment Advisors, Thomas N. Cooper, and Susan B. Cooper, which can be found here:

http://www.cyberdriveillinois.com/departments/securities/administrative_actions/2011/may/seniorfinancialstrategies_fo.pdf

The actions of Senior Financial Strategies and the Coopers came into question because of a consumer complaint involving the investment plans made by Senior Financial Strategies a Registered Investment Adviser and fell under the jurisdiction of the Securities Department.

The Indexed Annuity Leadership Council (IALC) strongly adheres to the highest marketing standards and in ethical and fair sales practices for the products that we sell including suitability review, disclosure, training, and consumer education.   The Indexed Annuity Leadership Council was formed by a group of life insurance organizations and producers to educate consumers about indexed annuities. The IALC is committed to providing complete and factual information about the use of indexed annuities as a part of any balanced financial plan.

This writing does not make any judgments on the suitability of the sales that took place with Pinnacle Investment Advisors, but speaks to the issue of the regulatory jurisdiction of annuity products involved in the transactions, and if there is regulatory creep of the product by securities regulators.

The Illinois Secretary of States Securities Department in the order speaks of Pinnacle Investment Advisors clients signing an “engagement letter” and points out their “fiduciary duty” to those respective clients.   This engagement letter directed Pinnacle to “provide investment portfolio review services which would include recommendations of changes to the investment portfolio”.  It seems clear that Pinnacle was acting in an investment advisory capacity, thus giving the Securities Department authority to intervene with their regulatory authority, regardless of the product that was being sold to the clients.  Merely because annuities were involved in the transaction, it is not safe to assume that the regulatory authority over those products is being usurped by the Securities Department.

Based on discussions with various sources at the Illinois Department of Insurance and the Illinois Securities Department it is our understanding that the order specifically addresses the regulation of “investment plans” and “investment planning service”.  The IALC is comfortable from these discussions that the order did not intend to extend jurisdictional authority over the insurance status of the indexed annuities filed and approved by the Department of Insurance in the State of Illinois or to supercede the 2009 Bulletin issued by Insurance Director Michael McRaith that made it perfectly clear that fixed indexed annuities are regulated by the Illinois Department of Insurance.

The Illinois order was entered on May 24, 2011.  The respondents have 35 days in which to appeal for judicial review.  All indications are that Pinnacle Investment advisors plan an appeal for judicial review.

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