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Variable Annuity Investment Lawyers

Variable annuities are a hybrid investment with features of securities and insurance.

Although they can help provide a fixed income later in life, variable annuities have restrictive, complex, and confusing features that make them inappropriate for many investors. They are also a high-commission investment product, which can lead to aggressive broker sales tactics.

Variable annuities are a leading cause of FINRA investor complaints. If you suffered investment losses from variable annuities and feel that their risks were not properly explained to you, your losses may be recoverable.

Variable Annuity Investment Lawyers


Typical features of variable annuities include:

  • Tax-deferred growth
  • A death benefit
  • Periodic payment options that can provide guaranteed lifetime income

When an investor buys a variable annuity, they make either a lump sum payment or a series of payments that are invested into sub-accounts (usually mutual funds). In return, the investor is promised a future benefit. The benefit payments can either begin right away (immediate annuity) or be delayed to the future (deferred annuity).

However, as the name “variable annuity” implies, the investment’s rate of return is not fixed. Rather, it varies depending on the performance of the sub-accounts.


Potential drawbacks of variable annuities are:

  • The investor will not achieve any gains—and may even lose money—since the rate of return is performance-based.
  • A lack of liquidity.
  • Fees and expenses such as surrender charges, sales charges, early withdrawal tax penalties, mortality and expense risk charges, and charges for special features such as guaranteed minimum income and principal protection.

While variable annuities have features similar to an Individual Retirement Account (IRA), IRAs offer more tax benefits. Investors are often better off maxing out their IRA contributions before they consider a variable annuity.


The Financial Industry Regulatory Authority (FINRA) has specific rules governing the sales of variable annuities.

When recommending a variable annuity to an investor, a broker must inform the customer of the investment’s risks and features, including things like potential tax penalties, market risk, and fees and costs.

Brokers must also understand the customer’s investment profile and have reason to believe that a variable annuity is suitable for a particular investor. As a secondary precaution against unsuitability, a principal broker with the firm must review and approve the customer’s variable annuity application before sending it to the issuing insurance company.

If these steps are not followed—and the client ends up losing money on the investment—the brokerage firm may ultimately be held responsible for the client’s losses under FINRA’s failure to supervise provisions.


Ponzi schemes—investment schemes that use money from new investors to pay off earlier investors, with little or no real earnings—have been around for nearly a century, and are still going strong.

While major Ponzi schemes such as the Bernie Madoff scam make headlines, many smaller, less-publicized Ponzi schemes result in investor losses every year.

Ponzi scheme masterminds may face civil and even criminal charges for investment fraud, but this rarely results in investors getting their money back. A more practical recovery strategy for defrauded investors is to bring a claim against the broker and brokerage firm that sold them shares in the Ponzi scheme.


Ponzi schemes are named after Charles Ponzi, who scammed thousands of New Englanders in a postage stamp scheme in the 1920s.

The investment vehicles have changed over time, but the basics of a Ponzi scheme remain the same: the scammer offers returns to investors, but rather than reinvesting the money and earning profit-based returns, the scammer simply finds new investors and uses their money to pay off existing investors. In short, the Ponzi schemer robs Peter to pay Paul.

As long as there are fresh investors, the scheme keeps going. At some point, however, new recruits dry up, the mastermind takes the money and runs, or numerous investors request to cash out (often during an economic downturn). When any of these occur, the Ponzi scheme collapses—taking investors down with it.


Bernie Madoff became a household name as the perpetrator of the largest Ponzi scheme in history. Madoff’s $65 billion fraud hurt large and small investors alike. Only a few fully recouped their losses.

Madoff’s fraud made investors more aware of Ponzi schemes. It also put more pressure on the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to crack down on Ponzi Schemes, since Madoff flew under regulators’ radar for decades.

But Ponzi schemes are still a major investor threat. In 2016, 59 Ponzi schemes were uncovered in the U.S. with a total of $2.4 billion in losses. Since 2012, about 65 Ponzi schemes per year have been discovered. The mean scheme is worth $6 million.

Recent schemes show that scammers are finding new ways to defraud investors. For example, the SEC has warned about Ponzi schemes using virtual currencies (such as Bitcoin), while FINRA has warned about social media-linked Ponzis.

In 2017, the SEC charged two men with running a Ponzi scheme involving tickets to popular shows like the Broadway musical Hamilton and Adele concerts. Also in 2017, a former NFL player was charged for his role in a Ponzi scheme that targeted professional athletes.

The SEC offers a list of Ponzi scheme red flags that includes:

  • An offer of high returns with little or no risks
  • Returns that do not go up and down over time
  • Investments in unregistered securities
  • Account statement errors
  • Promoters offering investors even high returns for not cashing out


When a Ponzi scheme comes crashing down and the schemer is caught, there may be criminal proceedings that result in assets being returned to defrauded investors. But investors are unlikely to recover more than pennies on the dollar through such an action.

It is often more efficacious for Ponzi scheme victims to pursue securities litigation or arbitration against the broker and/or the brokerage firm that promoted investment in the scheme. A defrauded investor may also have viable claims against parties that aided and abetted the scheme, such as banks, attorneys, or accountants.

Free Initial Consultation with an Investment Lawyer

When you need legal help with securities, investments or other business matters, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506