Citizens Financial Group Inc., a Top 10 banking company, has been charged by Massachusetts regulators with "unethical and dishonest" sales of variable annuities to senior citizens at a Cape Cod branch as part of a probe the state says could find systemic problems at Citizens.
A spokeswoman for Citizens said Friday that the Providence, R.I., company, a unit of Royal Bank of Scotland Group PLC, will cooperate fully with all regulatory inquiries. She would not answer questions about how the company would deal with potential damage to its image. Citizens, under the rubric of its Scottish parent, was the No. 10 U.S. banking company in asset size, at $134 billion as of Sept. 30.
The Massachusetts Securities Division charged the brokerage arm of Citizens in an administrative complaint on Thursday with civil fraud for selling the annuities to elderly bank customers at a branch office in South Yarmouth, Mass. The complaint alleged that branch employees referred 16 customers to brokers who sold them an aggregate $1.6 million of variable annuities from the beginning of 2003 to the present. Tellers at the bank earned compensation for the referrals.
Industry experts generally consider variable annuities, with their high fees and tax benefits that are fully realized over decades, inappropriate investments for elderly customers.
Brian McNiff, a spokesman for the Massachusetts Securities Division, said it is investigating other Citizens branches. The state is seeking an administrative fine and cancellation of the allegedly inappropriate sales, he said.
