The Securities and Exchange Commission has censured Gilman Ciocia and its Prime Capital Services unit for misrepresenting the variable annuities sold to senior citizens in South Florida.

In an order issued Tuesday, the SEC found that from approximately November 1999 through February 2007, PCS, a broker-dealer that Gilman Ciocia acquired in 1999, offered and sold variable annuities that were unsuitable investments for elderly customers due to the customers' ages, liquidity and investment objectives.

The order also found that Gilman Ciocia aided and abetted the broker-dealer's fraud by arranging and marketing free-lunch seminars in the South Florida area at which PCS registered representatives recruited elderly customers whom they later induced to buy variable annuities. The SEC further found that PCS failed to implement the firm's supervisory procedures in a way that reasonably could be expected to detect and prevent the registered representatives' violations of federal securities laws.

The SEC issued an order censuring both PCS and G&C, and ordered them to cease and desist from violating securities laws. PCS was also ordered to disgorge $97,389.05, plus $46,873.53 in prejudgment interest, while G&C was ordered to pay $1 in disgorgement and a civil monetary penalty of $450,000 to be paid in three installments.

In addition, PCS and G&C have agreed to take several steps, including hiring an independent compliance consultant to review and recommend changes to PCS's supervisory procedures; restricting some representatives from involvement in variable annuity sales until the independent compliance consultant has completed its review; refunding the variable annuity fees incurred by certain elderly customers of particular registered representatives; and giving notice of the settlement to elderly customers who bought variable annuities from particular registered representatives in the past five years.

PCS and G&C consented to the issuance of the order without admitting or denying any of the findings.

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