MML Investors Services: Customer Complaint Information

Our law firm is investigating customer complaints against MML Investors Services.  MML Investors Services is a division of the Springfield, Massachusetts-based insurance giant MassMutual, MML and boasts $200 billion in assets under management with more than 7,500 representatives across the country. If you or someone you know lost money investing with MML Investors Services, contact us at (212) 203-9300 for a free and confidential attorney consultation.

$4 Million Fine over Rep’s GameStop Recommendations

MML Investor Services was “obviously totally at fault” for failing to supervise an employee’s social media activities during the GameStop stock hubbub in early 2021, according to Massachusetts Secretary of the Commonwealth William Galvin. In a consent order issued in September, the Massachusetts Securities Division described hundreds of social media postings by the agent, Keith Gill, as well as hundreds of hours of YouTube videos. According to a report by Wealth Management, many of his postings “coincided with a run on GameStop shares, causing wild swings in its price and in the market.” He disclosed neither his name nor his affiliation with MML Investors Services in his YouTube videos, the regulator charged, and his firm failed to supervise his and other agents’ social media use.

Gill’s intense cheerleading of GameStop stocks contributed to an online hysteria around the company, fueled by both amateur and professional traders and “loosely organized” on the message board Reddit, that ended up increasing its share price “as much as 600 percent.,” according to a New York Times report. On YouTube and other platforms, Gill tracked his own investment in GameStop, at one point sharing on Reddit that his “original $53,000 bet on GameStop had ballooned in value to $48 million.” At the same time, he was employed by MML Investors Services as a “financial wellness education director,” a position that involved the creation of educational materials.

Gill, for his part, argued in Congressional testimony that he was not acting as an advisor while employed at MML; his attorney argued the same in a statement to the New York Times. Nonetheless, the Massachusetts Securities Division alleged, he executed trades for three people not associated with MML Investors Services’ and without the firm’s approval. In total, he made nearly 1,700 trades in those individuals’ accounts, including two trades of almost $500,000—far in excess of the firm’s per-transaction limit of $250,000 that should have provoked a compliance review, but failed to. The regulator also found that Gill executed two trades in GameStop stock—unbeknownst to MML—worth at least $700,000.

MML agreed to pay a fine of $4 million over its alleged supervisory failures, though it neither admitted to nor denied the charges.

SEC: MML Failed to Disclose Mutual Fund Conflicts of Interest

Mere days before it reached that $4 million settlement with the Massachusetts Securities Division, MML Investors Services arrived at a $2.1 million settlement with the Securities and Exchange Division. According to the SEC’s order, the firm failed to properly disclose conflicts of interest involving third-party revenue sharing payments it received from its clearing firm when it recommended certain mutual fund share classes. In some cases, it recommended share classes for which it received undisclosed revenue payments even when share classes “that presented a more favorable value” were available to clients, leading to the SEC’s allegations that the firm breached its duty to seek best execution for its customers. In total, MML received $2.5 million in revenue sharing payments from its clearing firm, which it later credited back to its clients. The firm also agreed to pay $2.1 million in disgorgement and penalties in connection with the SEC’s findings.

$1.2 Million Award over Diversity Lending Group Ponzi Scheme

In 2013 a FINRA arbitration panel ordered MML Investors Services and its broker Kimberly Michel to pay $1.2 million to a California investor. As the Wall Street Journal reported, the investor alleged the firm acted negligently in allowing former MML broker Steven Corzan advise her to use her home equity and retirement plan funds to invest $1.2 million in Diversity Lending Group notes, an unregistered security that turned out to be a Ponzi scheme. Corzan, having previously filed for bankruptcy protection, was not included in the arbitration claim; he was barred by FINRA in 2013 over findings he sold at least five investments in the Ponzi scheme.

Complaint: MML Broker Sold $3.5 Million in Ponzi Scheme Notes

Broker Floyd Powell was registered with MSI Financial Services and later MML Investors Services when he allegedly sold nearly $3.5 million dollars in promissory notes connected to the Woodbridge Group of Companies, “a purported real estate investment fund that turned out to be a $1.2 billion Ponzi scheme,” according to Investment News. A 2019 FINRA order barring Powell from the securities industry found that he sold the notes to a total of 13 investors, 11 of whom were MML or MSI clients (the firms merged in 2017). While he did not notify either firm of the sales or receive approval for them, he allegedly earned $103,598 in connection to the unapproved private securities transactions.

The Woodbridge Group of Companies was a massive Ponzi scheme targeting largely senior citizens, according to charges by the Securities and Exchange Commission in 2017. Headquartered in Boca Raton, Florida, the companies allegedly “defrauded more than 8,400 investors” through aggressive tactics, representing itself as a loan business that provided short-term financing to commercial property owners and received annual returns of 11-15%. The company allegedly promised investors 5-10% annual interest on their investments, according to the SEC, while trying to keep customers from cashing out their loans when the terms were up. Its true borrowers, however, were allegedly other companies owned by its founder, Robert Shapiro, who used investors’ funds to “line his pockets,” pay back other investors, and pay as much as $64.5 million in commissions to salespeople who represented Woodbridge as a conservative investment.

Shapiro eventually pleaded guilty to orchestrating the Ponzi scheme, receiving a 25-year sentence for conspiracy and tax evasion charges. In 2019, Woodbridge and Shapiro were ordered to pay $1 billion in penalties and disgorgement related to the scheme. “Our complaint charged that when Woodbridge’s fictitious business model collapsed, the company stopped paying investors and filed for Chapter 11 bankruptcy protection,” an SEC official said at the time. “The settlement provides for the return of significant funds to investors.”

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