Investigation of FSC Securities Corporation Financial Advisor Sandeep Varma

Posted on Sunday, March 11th, 2018 at 9:17 am    

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There are options for customers of FSC Securities Corporation financial advisor Sandeep Varma (CRD# 1926613). Varma has been registered with FSC Securities Corporation in San Diego, California since 2015.

In February 2018, FINRA sanctioned Varma to $15,000 in civil and administrative penalties and fines and suspended him for 10 days after he “consented to the sanctions and to the entry of findings he used a seminar slide presentation promoting a complex estate planning strategy involving the use of a CRT that failed to provide a sound basis for evaluating the CRT strategy, failed to provide a balanced discussion of the risks and rewards associated with the strategy, and contained claims that were exaggerated, promissory, and/or misleading.” FINRA found that beginning in the early 1990s, Varma started employing a strategy with certain customers designed to avoid paying capital gains taxes on the sale of appreciated assets. “Under the strategy, customers would typically sell appreciated real estate through a CRT, without immediately paying capital gains tax on the sale, and the proceeds from the sale could then be invested in various investment instruments held within the CRT. Typically, Varma recommended that the proceeds from the sale be invested in variable annuities held within the CRT. At the time the CRT was created, Varma’s customers would also typically purchase some form of life insurance policy through an irrevocable children’s trust to replace the value of the appreciated asset for the customers’ heirs. Varma’s customers would then take periodic, required income from the CRT and use the income from the CRT to pay, in whole or in part, premiums associated with the life insurance policy Varma recommended to replace the value of the sold appreciated asset.”

FINRA also found that Varma conducted four seminars promoting a strategy involving the use of CRTs, repeatedly referencing the elimination of capital gains tax on the sale of appreciated assets by using the CRT strategy. The presentation failed to disclose, however, that the strategy only avoided capital gains tax at the time of the sale of the appreciated asset. The presentation failed to disclose that the customers’ ability to pay the life insurance premiums using income from the CRT was dependent on the performance of the investments held by the CRT. The seminar presentation also failed to disclose the potential risk that the life insurance policy could lapse if the customers were unable to afford to pay premiums associated with maintaining it or that the life insurance policy payout was dependent on the claims-paying ability of the insurance provider. The presentation projected performance of assets held in the CRT in an exaggerated and promissory manner by projecting only positive performance and not clearly disclosing how negative investment performance could affect the strategy.

Varma has been the subject of five customer complaints between 2002 and 2017, two of which were denied and one was closed without action, according to his CRD report:

April 2017. “Recommendation to purchase insurance product in 2000 was allegedly unsuitable.” The customer sought $2,708,644 in damages and the case was settled for $350,000.

January 2016. “Recommendation to liquidate securities caused losses, and insurance policy purchases were unsuitable. Activity period 2002-2014.” The customer sought $6 million in damages and the case was settled for $850,000.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, FSC Securities Corporation may be liable for investment or other losses suffered by Varma’s customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.