Jump to content
Sign in to follow this  

Brokers Targeted TSP Participants

Recommended Posts

Reason 5,062 why we need a Fiduciary Standard: The Federal Thrift Savings Plan is considered gold standard by many (low fees, manageable number of choices, etc). The SEC alleges that four brokers targeted TSP participants nearing retirement with sizable balances. Guess what product they recommended?


The Allegations
The SEC’s complaint alleges that four brokers (doing business as “Federal Employee Benefits Counselors”) targeted federal employees who were nearing retirement and who had sizable funds invested in the federal employees’ defined contribution plan (the Thrift Savings Plan or TSP). The complaint alleges that the brokers misled TSP participants concerning significant details about recommended variable annuity investments, including the associated fees and guaranteed investment returns.

Most significantly, the brokers allegedly fostered the misleading impression that they were in some way affiliated with or approved by the federal government. In some instances, these TSP participants were led to believe that their funds would be invested in a product that was offered, vetted, or specifically selected by the TSP. According to the SEC’s complaint, the brokers sent investors written materials that obscured that the investment was a privately issued variable annuity with no connection to the TSP. According to the complaint, the brokers sold approximately 200 variable annuities with a total face value of approximately $40 million to federal employees, who used monies rolled over from their TSP accounts to fund their purchases. The brokers collectively earned approximately $1.7 million in commissions on these sales.

(It should be noted that these are allegations by the SEC and the matter has not been fully adjudicated. However, two of these individuals settled the claims brought by the SEC and, as part of the agreement, have been barred from selling securities. Additionally, these four individuals are no longer registered to sell securities.)


Share this post

Link to post
Share on other sites

Thanks for posting Dan. I ended up exploring Principal Review's site for the first time. It's wonderful. I wonder how many conflict of interest audits 

they've done in the 403(b) arena. I suspect that in schools where a TPA is used, the school would refer such requests to them. Unless of course, the school had the result of an audit first.

Share this post

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this