Oakwood Capital Securities, Inc., formerly known as Gardner Financial Services, Inc, has agreed to pay a fine of $20,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

Between October 2019 and December 2020, Oakwood, while under previous management, failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to surveil rates of deferred variable annuity exchanges.

Oakwood’s written supervisory procedures included a general requirement that the firm implement surveillance procedures to identify which, if any, of its registered representatives had engaged in inappropriate rates of exchanges. However, the firm failed to establish or maintain any procedures to surveil its registered representatives’ deferred variable annuity exchange rates, and the firm did not maintain any system for tracking rates of deferred variable annuity exchanges.

The firm’s sole review process for variable annuity transactions was a manual transaction-by-transaction review of each application for approval of the transaction itself. No review was conducted to monitor registered representatives’ exchange rates.

As a result, Oakwood failed to detect a series of short-term variable annuity exchanges recommended by one of its registered representatives during the relevant period, including recommendations of multiple unsuitable exchange transactions.

Therefore, Oakwood Capital Securities violated FINRA Rules 3110, 2330(d), and 2010.

On top of the $20,000 fine, the firm has agreed to a censure.

Oakwood Capital Securities, Inc. (CRD No. 21000) has been a FINRA member since 1988. The firm is headquartered in St. Louis Park, Minnesota, has 31 active branches and approximately 80 registered representatives. The firm operates a general securities business, including sales of variable annuities during the relevant period.

Between 1988 and 2022, Oakwood Capital Securities was known as Gardner Financial Services, Inc. On May 1, 2020, Gardner Financial Services was sold to new ownership, and the firm’s prior owner and former Chief Compliance Officer left the firm after December 31, 2020.