Brokerage Firms that Sold NorthStar Financial Services (Bermuda) Annuities Could Be Liable to Investors for Unsuitable Investment Recommendations
FINRA Arbitration Claims Could Be the Only Way for Investors to Potentially Secure Compensation for Investment Losses in NorthStar (Bermuda) Investment Contracts and Annuities
Stoltmann Law Offices continues to evaluate and investigate claims by investors against several United States-based brokerage firms that recommended clients invest in various securities products offered through NorthStar Financial Services (Bermuda), Ltd. These investments were all pitched by financial advisors as being similar to U.S. bank certificates of deposit, only with higher interest rates. Many of the investments took the form of “annuities” and the conservative nature of the investments was paramount to the sales pitch to investors.
On September 25, 2020, the Bermuda Monetary Authority filed a winding-up petition in Bermuda court against NorthStar Financial Services (Bermuda) Ltd. This liquidation created a worst case scenario for investors seeking to get their principal investments back from the faltering company. This came on the heels of the company’s owner Greg Lindberg, being indicted on federal wire fraud and bribery charges in 2019. Mr. Lindberg was convicted and is currently serving his seven year prison sentence. Lindberg is suspected of comingling investor funds with his other businesses. According to bankruptcy records, at the end of 2020, NorthStar reported a deficit of $260 million with only $8 million in assets. As usual, it is the investors who will pay the price. However, investors have legal options to potentially recover these losses.
Financial advisors were offered substantial commissions and incentives to sell NorthStar annuity products, which included the Global VIP Elite, Global Advantage Plus Series, Global Index Product, and the Global Advantage Select. These annuity products allegedly offered segregated account protection, generous liquidity terms, as well as the benefits of a Bermuda trust structure. The problem for the brokerage firms that sold these products are many. First, all brokerage firms have a duty to only sell their clients suitable investments, based on objectives, risk tolerances, and financial resources. Every investor we have spoken to that was sold a NorthStar product had conservative investment objectives. Second, firms are required to perform due diligence on a product prior to authorizing their financial advisors to sell it. This requirement has been explained in detail to FINRA brokerage firms in numerous Regulatory Notices including Regulatory Notice 10-22, discussing the requirement in connection with private placements, NASD NTM 03-71 discussing the vetting of “non-conventional investments”, and NASD NTM 05-26 discussing the vetting of “new products”.
Because these NorthStar Financial annuities and investment contracts were not domestic securities – meaning they were not being sold by a U.S. bank, they certainly required a higher level of scrutiny prior to being sold to clients. Simply put, a certificate of deposit offered by U.S. Bank requires a far lower level of scrutiny than an esoteric annuity-like product offered by a Bermuda-based financial company like NorthStar. Most brokerage firms fail to adhere to the standard required of them when selling “new” products like this because the level of investigation can take a lot of time and effort. Instead, brokerage firms prefer to collect a bunch of paper, put it in a file, check boxes on a checklist, and then tell their financial advisors to sell the product to their clients.
Numerous US-Based brokerage firms sold these NorthStar products to their clients including:
- SunTrust Investment Services
- Bankoh Investment Services
- Ocean Financial Services
- Cetera Advisors
- Bancwest Investment Services
- Raymond James
- Unionbanc Investment Services
- P. Morgan Securities
- Truist Financial Services
If you were recommended an investment in a NorthStar Financial Services (Bermuda) Ltd. Annuity or investment contract, please call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation free consultation with a securities attorney. We are a contingency fee firm which means we do not get paid until you do.