According to FINRA, Francis Joseph Velten Jr. was barred from association with any FINRA member in all capacities for failing to produce information and documents requested by FINRA in connection with an investigation into allegations that he churned and flipped customer accounts by encouraging elderly customers to surrender annuities, sell mutual funds, and invest proceeds into bonus annuities.
FINRA investigated allegations that Velten improperly traded for elderly customers away from his firm, causing them to incur significant, unnecessary surrender charges so he could generate sales commissions. Annuity flipping—encouraging customers to exchange existing annuities for new ones primarily to generate commissions—is a particularly harmful practice affecting seniors. Surrender charges can be substantial, and new annuities typically restart lengthy surrender periods, locking seniors into products that may be unsuitable for their time horizon and liquidity needs.
When FINRA requested information and documents necessary to investigate these serious allegations, Velten refused to respond. His refusal deprived FINRA of information needed to perform its regulatory function and fully investigate potential misconduct. FINRA needed this information to determine whether Velten engaged in unsuitable annuity exchanges, how many customers were affected, and what losses they incurred.
Elderly investors are particularly vulnerable to unsuitable annuity recommendations because they often have limited time horizons, need for liquidity, and may not fully understand complex annuity features. Bonus annuities, which offer upfront bonuses, often carry higher fees and longer surrender periods that may offset any bonus received. Encouraging seniors to exchange annuities primarily to generate new commissions while subjecting them to substantial surrender charges and extended surrender periods is predatory conduct.
Velten's failure to respond to regulatory requests prevented FINRA from holding him accountable and potentially providing restitution to harmed customers. The permanent bar is appropriate given both the serious underlying allegations targeting vulnerable seniors and the refusal to cooperate. Investors, especially seniors considering annuity exchanges, should obtain independent analysis before surrendering existing annuities. FINRA BrokerCheck provides information about brokers' disciplinary histories, helping investors avoid individuals with histories of unsuitable annuity sales or refusal to cooperate with regulators.
