SEC Bars Advisor for Fraudulent Rollovers of Federal Retirement Plans

The Securities and Exchange Commission has barred a former advisor from the industry for his role in a fraudulent scheme that enticed federal government workers to roll over their retirement savings into high-commission variable annuities.

The complaint noted the name of their entity—Federal Employee Benefits Counselors—suggested they were affiliated with the government.

Photo Illustration by Staff; Dreamstime(3)

“Defendants employed several tactics calculated to mislead federal employees into believing that defendants and their recommended investment (that is, a variable annuity) were affiliated with or approved by the federal government,” the SEC said in its original complaint, filed in July 2017.

Jonathan Dax Cooke, who had been affiliated with LPL, accepted the ban and acknowledged his role, according to an SEC document describing the settlement.

Cooke had previously been found to have violated securities laws in a civil jury trial in the U.S. District Court in Georgia’s Northern District. Earlier this month, the presiding judge in that case ordered Cooke to pay nearly $400,000 in disgorgement and a civil penalty of a little more than $100,000, according to court records.

Cooke, whom the SEC says resides in Medellin, Colombia, could not immediately be reached for comment. His attorneys, Stephen Councill and Joshua Gunnemann of the law firm Councill, Gunnemann & Chally, did not immediately respond to requests for comment.

Cooke, along with three co-defendants who have each been barred from the industry by the SEC or Finra, targeted older federal government employees in a bid to induce them to convert their Thrift Savings Plan retirement accounts to the annuities they sold through an entity called Keystone Capital Partners that operated under the name Federal Employee Benefits Counselors.

The complaint said that Cooke and his co-defendants misled investors with comparisons between the annuity they were selling and the annuity offered through the government’s Thrift Savings Plan. They also misled investors about the fee structure and surrender fees associated with the annuity they were recommending.

The complaint noted that the name of their entity—Federal Employee Benefits Counselors—”insinuated that they were affiliated with the federal government while obscuring the fact that they were associated with a broker dealer.”

The advisors included an “eagle-encircled insignia” on their website and firm documents that could easily be mistaken for the official seal of a federal agency. Additionally, the commission said the advisors further muddied the waters by presenting investors with a document to execute the purchase of the variable annuities that contained portions of the official government document federal workers use to transfer money from their Thrift Savings Plan accounts.

“In truth, the variable annuities that defendants offered and sold were privately-issued, separate and apart from the TSP and the federal government, and had much higher costs than alternatives available through the TSP,” the complaint said. “Moreover, the representatives had no affiliation with, and were not approved or vetted by, the federal government.”

From 2012 to 2014, Cooke and his partners sold around 200 variable annuities worth roughly $40 million to federal employees, raking in $1.7 million in commissions, the SEC said.

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