A broker-dealer operating in Delaware, Horace Mann Investors, Inc., has agreed to provide settlement payments to numerous customers with IRA accounts opened by one of its registered representatives, Dieter Hofmann, Attorney General Kathleen Jennings announced.
“The resolution provides necessary relief to over 120 teachers in Delaware in connection with their IRA accounts with Horace Mann”, said Attorney General Kathleen Jennings. “Investors look to their investment professionals for guidance in connection with saving for retirement. Those investment professionals must not engage in dishonest or unethical practices and should be sufficiently supervised by the companies with which they are affiliated. My Investor Protection Unit will continue to hold investment professionals accountable for violations of the Delaware Securities Act and conduct outreach to educate investors.”
In 2016, the State of Delaware transitioned its deferred compensation plans from numerous independent 403(b) service providers, including Horace Mann, to a sole provider, Voya Financial. Related to this transition, over 120 teachers with 403(b) accounts with Horace Mann opened IRAs in 2016 and 2017 with Horace Mann, through one of its registered representatives, Dieter Hofmann. The Attorney General’s Investor Protection Unit (“IPU”) investigated the facts and circumstances relating to the opening of these IRAs and both Horace Mann and Dieter Hofmann cooperated with IPU in connection with its multi-year investigation. IPU alleged and concluded that Dieter Hofmann engaged in dishonest and unethical practices in violation of the Delaware Securities Act. Specifically, IPU alleged that Dieter Hofmann took unfair advantage of his customers with 403(b) accounts who were confused about the transition to Voya by providing them with inadequate or inaccurate information which was misleading. IPU alleged and concluded that Horace Mann failed to sufficiently supervise Dieter Hofmann. The Delaware Office of the State Treasurer provided helpful assistance in connection with the investigation.
IPU’s investigation was resolved pursuant to the terms of administrative consent orders dated December 30, 2019 with each of Dieter Hofmann and Horace Mann. Neither Dieter Hofmann nor Horace Mann admitted or denied any wrongdoing. Horace Mann and Dieter Hofmann each agreed to pay a fine of $250,000 and make a $50,000 payment for investor education for Delaware educators. Dieter Hofmann is no longer affiliated with Horace Mann and agreed to a one-year suspension from conducting business as a broker-dealer agent or investor advisor representative in Delaware. IPU and Horace Mann agreed that Horace Mann will provide settlement payments for certain customers to compensate those customers for potential lost earnings. Specifically, Horace Mann will provide the following three options to certain customers to choose amongst:
(1) close the Horace Mann IRA and receive payment/reimbursement of estimated fees and estimated federal/state income taxes as a result of closing the Horace Mann IRA;
(2) keep the Horace Mann IRA and receive a reimbursement of fees and estimated taxes; and
(3) continue with the Horace Mann IRA without any changes.
A settlement administrator, Ronak V. Patel, will handle all aspects of the settlement payment and settlement option selection process. Eligible customers will be contacted by the settlement administrator regarding the settlement payments, if applicable, and the settlement selection process.