Dive Brief:
- A division of Citizens Financial Group is under investigation by Massachusetts securities regulators over its sale of annuities controlled by now-indicted financier Greg Lindberg, The Wall Street Journal reported Wednesday.
- News of the investigation follows a Journal article Sunday that reported tens of thousands of people had $2.2 billion of their funds frozen since 2019 amid the collapse of Lindberg’s insurance empire.
- Colorado Bankers Life Insurance was Lindberg’s largest insurer, and Citizens Securities was a major seller of the firm’s annuities, according to The Wall Street Journal.
Dive Insight:
A spokesperson for Secretary of the Commonwealth William Galvin’s office, which confirmed the probe to the Journal, said the investigation is focusing on individual Citizens Securities brokers. The spokesperson declined to provide other details.
In a securites filing Thursday, Citizens said it does not believe its past sales of fixed annuity products underwritten by Colorado Bankers presents material financial exposure to the company.
Citizens said it conducted appropriate diligence on the insurer and considered the firm’s investment rating and third-party research in placing its products on its platform, adding the firm had strong investment ratings at the time.
“As with any investigation or potential investigation we would decline to comment,” a spokesperson for Providence, Rhode Island-based Citizens Financial told the Journal.
Lindberg’s alleged wrongdoing “is a matter of large-scale criminal fraud that impacted many investors,” the spokesperson said.
“It is very unfortunate that our customers and others have suffered as a result of this situation and we are committed to doing what we can to help alleviate the impacts, including offering liquidity programs for customers who are experiencing hardship,” the spokesperson added.
In October 2018, the firm said it became aware of an investigation into Lindberg and halted sales of Colorado Bankers’ fixed annuities.
Impacted customers are unable to access their Colorado Bankers annuity funds, the firm said.
Citizens said it has been offering liquidity programs to help alleviate the impacts while the insurer remains in rehabilitation.
“The significant majority of the annuities sold are below the level of state insurance guarantees,” Citizens said.
In 2017 and 2018, shortly after Lindberg acquired Colorado Bankers, the insurer ramped up sales of fixed annuities, according to regulatory filings seen by the Journal.
Lindberg, who was indicted last month, is accused of loaning $2 billion of his insurers’ funds to firms in his private conglomerate while allegedly tapping large sums to finance his opulent lifestyle, the Journal reported.
The financier has pleaded not guilty and is out on bail, according to the outlet.
