Arkansas suspends breakaway broker with Concert Wealth Management
A former Merrill Lynch broker in Arkansas has been fined $28,000 and suspended from practicing as an investment adviser for 30 days for selling a money-losing variable annuity to a municipal police and fire pension fund.
A former Merrill Lynch broker in Arkansas has been fined $28,000 and suspended from practicing as an investment adviser for 30 days for selling a money-losing variable annuity to a municipal police and fire pension fund.
John R. Turbeville, who left Bank of America Merrill Lynch in January and a month later became affiliated as a registered investment adviser with Concert Wealth Management, consented to the findings by the Arkansas Securities Commissioner on Thursday without admitting or denying the facts.
The securitieis department had also accused him of pitching unusual services to the municipal pension fund and other funds to win their mandates and soliciting business without being registered.
The settlement is the latest twist in a series of cases against Mr. Turbeville, stemming primarily from his advisory activities with several Arkansas pension funds in 2007-08. Merrill discharged him on Jan. 4 for “conduct resulting in the loss of management’s trust and confidence,” according to the broker’s Central Registration Depository record at the Financial Industry Regulatory Authority Inc.
And last month, the firm agreed to pay $15,000 to the Arkansas securities commission for failing to supervise an unnamed broker over activities that match some of those spelled out in the claim against Mr. Turbeville.
The broker allegedly invested more than half of a pension fund’s holdings in a Transamerica Extra 2008 variable annuity with a nine-year lockup. He allegedly purchased the VA after liquidating the funds’ mutual fund holdings at a loss of $37,280.
As the principal of the annuity eroded throughout 2008, the pension fund was unable to cover its monthly benefit obligations of $8,000. The VA also generated “a substantial commission” for Mr. Turbeville that he would not have achieved from the fund’s fee-based account, the settlement order said.
He compounded the pension fund’s problems by failing to make good on his promise to file the fund’s 2007 annual report with the state pension review board, depriving it of at least $160,000 in so-called turnback funds from the state, the filing said.
The pension fund was identified by the Arkansas Business Journal as the Helena-West Helena Police and Fire Pension Fund. Helena-West Helena, a town of about 15,000, is located in the eastern part of Arkansas.
Mr. Turbeville also took on the unusual advisory obligation of agreeing to oversee the balloting and tally count for the election of another public pension fund’s management board. That raised conflict-of-interest concerns when board members elected in a special runoff subsequently selected him as their fund’s investment adviser.
“The election of a local police and fire pension board is not traditionally within the duties of an investment adviser,” the securities board noted.
Mr. Turbeville, whose firm operates under the name of Sage Wealth Management, also was charged with violating the state securities code by soliciting clients and making sales presentations after he left Merrill but before he had properly registered as an investment adviser under Concert Wealth Management’s aegis. Concert was fined $1,500 earlier this year for the violation, which it and the securities board said resulted from clerical errors in filings.
Felipe Luna, the president of San Jose, Calif.-based Concert, said there were “extenuating circumstances” that have not yet been disclosed that explain some of the alleged violations that primarily occurred when the broker was subject to Merrill’s “very well-designed and rigid” compliance standards.
He declined to elaborate because of an ongoing investigation by Arkansas’ insurance department and litigation by at least one municipality that says Mr. Turbeville misrepresented himself as working for The Charles Schwab Corp. Schwab is a major custodian for Concert advisers and their clients, and Sage is located in a building with a Schwab retail branch.
“We’re committed to our relationship with John,” Mr. Luna said. “He’s a standup guy who’s shown a remarkable amount of resilience and integrity in all his dealings with us.” He said that, in the future, annuities will not be part of Mr. Turbeville’s offerings, and said Concert is not responsible for paying the adviser’s $28,000 fine.
Mr. Turbeville did not respond to requests for comment. Calls to his office in Little Rock were picked up by an answering machine that didn’t name him or his firm. According to his CRD filing, he began his brokerage career at Merrill in 1977 and also did stints as a broker or branch manager at Dean Witter Reynolds, Lehman Brothers, Smith Barney Shearson, Prudential Securities and UBS Financial Services. He returned to Merrill in 2005.
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