The Mauriello Law Firm, APC announce the filing of an arbitration claim against ValMark Securities, Inc. and one of its representatives in connection with the sale of variable annuities to a Bakersfield couple. The arbitration claim is currently pending before the Financial Industry Regulatory Authority ("FINRA") (FINRA Arbitration Case No. 10–00345).

The claim alleges that a representative of ValMark persuaded the couple, a self–employed landscape contractor and manicurist, respectively, to take out a substantial additional mortgage on their home in order to use the proceeds to purchase a variable annuity – an insurance product within which investments may be made in "sub–accounts" –– and invest the proceeds entirely in a growth stock fund within the annuity.

The Claimants were conservative, risk–averse investors, and they did not need additional insurance. This recommendation not only tripled the Claimants' mortgage obligations, but it also put them in a highly leveraged position as the value of their home dropped significantly since their investment was made in 2007. At the same time, the value of their underlying investment in the annuity sub– account plummeted as well.

The high fees, surrender charges and market risk associated with variable annuities make them a poor investment choice for many investors, particularly elderly investors or seniors. Many of the features of variable annuities are poorly understood, as are the amounts of and allocations of the fees charged and the commissions paid. Yet, precisely because of the high fees associated with variable annuities (including costly "bells and whistles" in the form of various contract "riders"), variable annuities often are highly attractive products for financial advisors and stockbrokers to sell to clients.

Last year FINRA experienced a 161% increase in arbitration claims involving variable annuities compared to the previous year. Concerns by regulators over the sale of variable annuities have led to increased oversight and regulation of the sale, exchange and replacement of variable annuities by broker–dealers.