← Broker database 2024-06-24
Thomas Reyes Barred for Refusing to Testify About Undisclosed Annuity Sales
According to FINRA, Thomas Reyes was barred from the securities industry for refusing to appear for on-the-record testimony requested by FINRA in connection with an investigation into circumstances giving rise to Form U5 amendments filed by his member firm.
Reyes's firm filed two Form U5 amendments that triggered FINRA's investigation. The first amendment disclosed an internal review concerning potential undisclosed outside business activities by Reyes. The second amendment disclosed that the internal review concluded Reyes sold annuities that were not on the firm's approved product list away from the firm—a practice known as "selling away."
Selling away is a serious violation that often results in investor harm. When registered representatives sell securities or insurance products away from their firm without disclosure and approval, the firm cannot supervise those sales to ensure they are suitable, properly disclosed, and in customers' best interests. Selling unapproved products creates particular risks because the firm has not conducted due diligence on those products or determined they are appropriate for the firm's customers.
Annuities can be complex products with significant fees, surrender charges, and suitability considerations. When annuities are sold away from a firm without proper supervision, investors may be placed in unsuitable products, charged excessive fees, or subjected to inappropriate sales practices without the protections firm supervision provides.
FINRA sought Reyes's on-the-record testimony to investigate what occurred and whether investors were harmed. Reyes refused to appear for the requested testimony. This refusal violated FINRA Rule 8210 and prevented FINRA from gathering facts necessary to determine the extent of the selling away conduct and any customer harm.
The refusal to testify is viewed as an extremely serious violation because it obstructs FINRA's ability to protect investors. When FINRA cannot interview individuals involved in potential misconduct, investigations are compromised and investor protection suffers. The sanction for refusing to testify is almost always a bar from the industry, regardless of what the underlying investigation concerned.
For investors, this case illustrates the risks of purchasing securities or insurance products from your financial advisor when those products are not offered through the advisor's firm. Before investing, verify that the product is approved by the firm and that the transaction will be properly supervised and documented. Ask for written confirmation that the firm is aware of and has approved the transaction.
If you purchased an annuity or other investment from your advisor and later learned it was not approved by or properly disclosed to their firm, you may have been a victim of selling away. Such transactions often involve higher-than-necessary fees or unsuitable products because they lack proper firm oversight.
The bar from the industry is permanent and prevents Reyes from working in any capacity with a FINRA member firm. This sanction reflects both the seriousness of selling away conduct and the additional misconduct of refusing to cooperate with FINRA's investigation.