Citizens Bank, whose branches include this one in Boston, has been accused of unethical banking practices by Massachusetts Secretary of State William F. Galvin. The charges focus on sales practices abuses in the bank’s South Yarmouth location.
Massachusetts Secretary of State William F. Galvin, who accused Citizens Bank of unethical banking practices earlier this month, since has received more complaints from customers who do their business at Citizens and other banks. Galvin’s office last week broadened the scope of its investigation into the sale of annuities by local institutions.
Galvin has accused Citizens of targeting the members of the elderly population by recommending they invest in variable annuities. His complaint said many times such annuities were not suitable for those customers.
The complaint was filed against Citizens Investment Services Corp., now known as CCO Investment Services Corp. The complaint is focused on sales practices abuses in Citizen’s South Yarmouth branch.
“Often the recommendations of variable annuities were not suitable for these customers, nor were the costs or risks associated with variable annuities adequately disclosed,” the complaint stated. “Not only did CISC generate the majority of its business from Citizens Bank, but bank personnel were allowed to participate in meetings between customers and registered agents. CISC and Citizens Bank collaborated to assure a steady stream of business would flow to CISC by encouraging bank personnel to make as many referrals to CISC as possible.
“For instance, by exploiting certificate of deposit maturity lists, CISC facilitated frequent meetings between [Todd R. Nash, vice president and financial consultant at CISC] and elderly clientele – the primary objective being to sell each customer a variable annuity. Moreover, CISC and Citizens Bank further conspired to blur their respective business areas by conducting so-called ‘Blitz Days’ whereby bank personnel would devote an entire day to acquainting bank customers with CISC-registered agents.”
The bank defended itself when contacted by Banker & Tradesman last Friday.
“Citizens is a highly ethical company and we continue to cooperate fully with the investigation,” said Melodie Jackson, spokeswoman for Citizens Bank.
Citizens isn’t the only institution being targeted. According to Galvin spokesman Brian Mciff, the secretary of state’s office last week issued subpoenas to Sovereign Bank, Bank of America, Century Bancorp, Banknorth, Eastern Bank, Medford Co-operative and Brookline Savings Bank, Morgan Stanley, Prudential, UBS Paine Webber, American Express and Infinex Investments.
Mciff said Galvin is widening his inquiry and looking for further information after his office received more complaints regarding different banks.
Sovereign Bank spokeswoman Ellen Molle said the bank did receive a subpoena and plans to fully cooperate. However, she added that the bank is comfortable with its policies.
Daniel J. Forte, president of the Massachusetts Bankers Association, said MBA is “all for cooperating with the secretary of state on this issue.” But he added that the allegations are tarnishing the reputation of a number of banks, and the banking industry in general, before all the information is in.
“What’s premature is it sounds like allegations are being made before all the facts are gathered,” he said.
Forte said the banking industry is more heavily regulated than non-bank investment firms, but also noted, “It doesn’t mean we can’t improve.”
