On April 4, 2017, Zullo entered a Consent Order, a settlement, with the Massachusetts Securities Division resolving charges made in an administrative complaint by the state against Zullo and LPL.
The complaint alleged that Zullo, under the oversight of LPL, defrauded their clients, falsified client financial suitability profiles, and sold his customers unsuitable variable annuities. Pursuant to the Consent Order, without admitting or denying any allegations of fact or violations o flaw, he consented to a permanent bar from the securities industry in Massachusetts, a $40,000 administrative fine, and disgorgement of $1,875,348. Payment for disgorgement was waived due to Zullo’s circumstances, however, this does not preclude investors from retaining private attorneys to seek this recovery from LPL.
The action stems largely from variable annuity sales. Zullo, allegedly, recommended variable annuities to elderly individuals. Investment professionals have a legal duty to only recommend suitable investments. Variable annuities are inherently unsuitable for seniors. Not only do they lock-up the funds at a time when people need access to their funds, the investments pay the broker a very high commission. This commission is for the sale of many aspects of the variable annuity that senior investors do not need. These include tax deferral and life insurance. When a broker makes a heightened commission for the sale of things that are unneeded, the broker puts his interests ahead of the investors, and that constitutes a form of fraud known as the sale of “unsuitable investments.”
Zullo first became registered with FINRA as an IR in September 1998. He maintained that registration through consecutive associations with two member firms between September 1988 and August 2004. From August 2004 through December 2016, he was registered as an Investment Representative with LPL.
In November 2004, Zullo also became registered as IP through his association with the Firm. Zullo maintained those registrations through his association with the Firm until December 2016. Zullo worked for the Firm as a broker-dealer agent and investment adviser representative in Wellesley, Massachusetts.
On January 10,2017, FINRA sent a request for information and documents pursuant to FINRA Rule 8210 to Zullo with a response date of January 24, 2017. Zullo, through his counsel, requested two extensions to the January 10 request. Pursuant to these requests, FINRA extended the response date to March 1,2017.
Zullo did not provide any documents or information to FINRA in response to the January 10 request. On March 2,2017, FINRA sent a second request for documents and information pursuant to FINRA Rule 8210 to Zullo with a response date of March 16, 2017. Zullo did not provide any documents or information to FINRA in response to the March 2 request.
The resulting FINRA punishment is a permanent bar from the securities industry.