Northwestern Mutual Investment Services, LLC, headquartered in Milwaukee, Wisconsin, has been fined and censured by FINRA for failing to establish, maintain, and enforce a supervisory system reasonably designed to review and monitor transfers of monies from customer accounts to third party accounts and outside entities.
According to FINRA’s findings of fact, between September 2005 and February 2017, a Northwestern Mutual registered representative stole $473,496 from five of his customers’ variable annuities. The same representative also was found to have moved $121,123 from two customers’ variable annuities into another customer’s bank account in order to conceal his previous thefts from that customer.
FINRA found Northwestern Mutual to be in violation of FINRA Rule 3110 which requires member firms to implement a supervisory system for the activities of its registered representatives that is reasonably designed to achieve compliance with applicable securities law and regulations and FINRA’s rules.
Northwestern Mutual’s registered representative used forgeries of customer signatures on variable annuity distribution requests and submitted phony blank checks which showed the customers’ names and addresses but with bank routing and account numbers to the Northwestern representative’s personal bank account.
FINRA found that Northwestern Mutual failed to take reasonable measures to verify that the customers actually controlled the transferee bank accounts and that the annuity transfers were legitimate. FINRA also found that Northwestern Mutual failed to conduct a reasonable investigation in 2013 when its electronic review system flagged three of the representative’s withdrawals.
Northwestern Mutual consented to the imposition of a censure, a fine of $350,000, and a certification to FINRA that it has reviewed and enhanced its supervisory systems and written supervisory procedures so as to address the deficiencies identified by FINRA in its investigation. Northwestern Mutual also agreed to not take any action or make any public statement denying any of FINRA’s findings.