June 4, 2018
Financial Services

Voya Financial lands in legal hot seat

Photo | Contributed
Photo | Contributed
Windsor’s Voya Financial finds itself in legal hot water of late, including in Connecticut, for alleged conflicts of interest and lack of oversight at two units.
Gregory Seay

It has been a less than memorable spring so far for global wealth-manager/adviser Voya Financial Inc., based in Windsor.

In March, Voya, the former spinoff from Dutch insurer ING with headquarters and some 1,700 employees at 1 Orange Road, off Day Hill Road, agreed to a $3.6 million settlement with federal securities regulators for alleged conflict of interest practices at two of its subsidiaries — Voya Investments LLC and Directed Services LLC.

Now, Voya is tentatively set to appear before the state Department of Banking at a July "cease-and-desist'' hearing on Banking Commissioner Jorge Perez's determination that Voya failed to properly supervise some of its securities broker-dealers. Perez has proposed fining Voya a maximum $100,000 for its actions.

According to the banking department's online enforcement log, state bank regulators' claims against Voya stem from ongoing difficulties it has had supervising several former broker-dealers, including Dale J. Quesnel Sr., an ex-Enfield stockbroker.

Quesnel, the banking department's regulatory case summary says, was banned by Connecticut regulators for his alleged role in hawking some $2 million in dubious promissory notes to investors across the nation. Problem was, Voya had not vetted nor approved those notes — technically securities — for sale by its brokers.

Such activity is known in the securities industry as "selling away,'' and getting caught can cost violators their licenses, prompt a lifetime securities ban and fines, even jail time.

The banking department summary suggests Quesnel has been on the agency's radar for years, amid evidence that he was less than truthful in disclosures to Voya and state and federal securities regulators about his financial past and present, and his allegedly questionable dealings with clients in and outside Voya.

Perez, whose office licenses and regulates firms and individuals engaged in the issuance, sale or trading of registered stocks and securities, asserts that Voya failed to properly supervise Quesnel, as well as a handful of broker-dealers outside Connecticut.

"Quesnel was able to sell away the unregistered … offerings because Voya ignored multiple red flags that became apparent to Voya at different times during Quesnel's association with Voya," the cease-and-desist order reads. "These red flags should have put Voya on notice that Quesnel might be violating state securities laws." A banking department spokeswoman said the agency cannot comment on pending disciplinary matters.

In the Connecticut broker-dealer matter, a Voya spokesperson said the company does not comment on pending litigation.

About the $3.6 million settlement with the U.S. Securities and Exchange Commission, Voya said in a statement: " … This settlement … means we avoid a lengthy and costly litigation process and can focus our resources on delivering high-quality investment service to our clients."

Shifting strategy

Connecticut's disciplinary proceedings against Voya come against the backdrop of painful memories for many individual and institutional investors who watched the value of their stocks, bonds and other securities plummet in value amid the 2008 near-financial meltdown.

It also prompted many states to join the federal government in tightening rules regulating the securities industry.

As of March 31, Voya had $541 billion in assets under management and administration. The Fortune 500 company had 2017 revenues of $8.6 billion.

Meantime, Voya recently has also spent time tweaking its business model.

Last December, Voya announced plans to exit the annuities market, selling off closed-block variable annuity accounts valued at about $35 billion, plus disposing of its individual fixed and fixed indexed annuity business to an investor consortium led by affiliates of Apollo Global Management LLC, Crestview Partners and Reverence Capital Partners.

In March, Voya said it will acquire Pen-Cal Administrators, a California deferred pay-benefit consultancy for an undisclosed sum.

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