FINRA Fines Oakwood Capital Securities Over Supervisory Failures in Variable Annuity Oversight

Oakwood Capital Securities, Inc. has agreed to pay a $20,000 fine and accept a censure following a settlement with the Financial Industry Regulatory Authority (FINRA) over alleged supervisory lapses tied to variable annuity exchange practices.

According to FINRA, the firm — operating under previous management between October 2019 and December 2020 — "failed to establish and maintain a supervisory system" designed to monitor deferred variable annuity exchange rates. Although its written supervisory procedures called for surveillance to identify potentially inappropriate exchange activity, the regulator found that no such system was actually in place.

During the period in question, Oakwood relied solely on a manual, case-by-case review of individual variable annuity applications. FINRA noted that the firm conducted no ongoing monitoring of its registered representatives' exchange rates, resulting in missed detection of short-term exchanges and multiple unsuitable recommendations made by one representative.

FINRA determined that the firm violated Rules 3110, 2330(d), and 2010.

Oakwood Capital Securities (CRD No. 21000), headquartered in St. Louis Park, Minnesota, has been a FINRA member since 1988. Formerly known as Gardner Financial Services, Inc., the firm underwent an ownership change in May 2020, with its prior owner and Chief Compliance Officer departing at the end of 2020. Today, the firm operates 31 active branches and employs roughly 80 registered representatives in a general securities business that included variable annuity sales during the review period.