Archive for March 3rd, 2010

Zamansky: Annuities and the Avoidance of the Fiduciary Standard

March 3rd, 2010

There’s a saying on Wall Street: “Structured products are never bought, only sold”. The same could be said of annuities.

Selling annuities is an extremely lucrative and virtually risk-free business, which is one of the reasons why insurance companies and some Wall Street firms are aggressively lobbying Congress not to require brokers and other purveyors of financial products to adhere to a so-called “fiduciary standard.” Under the proposed standard, brokers and insurance salesmen would be required to put their clients’ interests ahead of their own, likely forgoing high-commission annuities for other, more appropriate investments.

Not surprisingly, Morgan Stanley has voiced concerns that the fiduciary standard would cut into its business. Morgan Stanley has good reason to worry: The firm earned $37 million from selling annuities in the first quarter of 2009 alone, or 1.22 percent of its noninterest income, according to a report by the American Bankers Insurance Association (ABIA). A Morgan Stanley spokesman recently told Bloomberg that expanding the fiduciary standard to include brokers would impinge upon the firm’s ability “to provide clients with products and services they want.” Or, perhaps more accurately, don’t want.

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U.S. SEC charges Miami couple in Ponzi scheme

March 3rd, 2010

U.S. securities regulators charged a prominent Miami couple on Wednesday with running a $135 million Ponzi scheme that victimized elderly Cuban-Americans living in South Florida.

In a complaint filed in Miami federal court, the Securities and Exchange Commission alleged that Gaston and Teresita Cantens, founders and co-owners of real estate developer Royal West Properties Inc in Miami, had enticed investors with promises of 9 to 16 percent returns.

Instead, beginning no later than 2002, they used new investor money to repay earlier investors and the company’s operating costs, the SEC charged. All told, the couple raised $135 million from hundreds of investors, many from South Florida’s Cuban-exile community, the complaint alleged.

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