                                                                          Digitally signed by
                           Illinois Official Reports                      Reporter of Decisions
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                                                                          accuracy and integrity
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                                  Appellate Court                         Date: 2016.10.13
                                                                          13:54:52 -05'00'




                      Van Dyke v. White, 2016 IL App (4th) 141109



Appellate Court       RICHARD LEE VAN DYKE, d/b/a Dick Van Dyke Registered
Caption               Investment Advisor, Plaintiff-Appellant, v. JESSE WHITE, in His
                      Official Capacity as Illinois Secretary of State; THE ILLINOIS
                      DEPARTMENT OF SECURITIES; and TANYA SOLOV, in Her
                      Official Capacity as the Director of the Illinois Department of
                      Securities, Defendants-Appellees.



District & No.        Fourth District
                      Docket No. 4-14-1109


Rule 23 order filed   July 29, 2016
Rule 23 order
withdrawn             September 7, 2016
Opinion filed         September 7, 2016


Decision Under        Appeal from the Circuit Court of Sangamon County, No. 14-MR-305;
Review                the Hon. John W. Belz, Judge, presiding.



Judgment              Reversed.



Counsel on            William P. Hardy (argued), of Hinshaw & Culbertson LLP, of
Appeal                Springfield, for appellant.

                      Lisa Madigan, Attorney General, of Chicago (Carolyn E. Shapiro,
                      Solicitor General, and Christopher M.R. Turner (argued), Assistant
                      Attorney General, of counsel), for appellees.
                              E. King Poor, Gary R. Clark, and Charles E. Harper, all of Quarles &
                              Brady LLP, of Chicago, for amicus curiae National Association for
                              Fixed Annuities.
                              Kirk W. Dillard, Julie L. Young, and Hugh S. Balsam, all of Locke
                              Lord LLP, of Chicago, for amicus curiae Fidelity & Guaranty Life
                              Insurance Company and Indexed Annuity Leadership Council.

                              Christopher D. Galanos, of Quinn, Johnston, Henderson, Pretorius &
                              Cerulo, of Springfield, amicus curiae.

                              Anne-Valerie Mirko, of North American Securities Administration
                              Association, Inc., of Washington. D.C., amicus curiae.



     Panel                    JUSTICE TURNER delivered the judgment of the court, with opinion.
                              Justices Harris and Holder White concurred in the judgment and
                              opinion.


                                               OPINION

¶1         In March 2013, the Illinois Department of Securities (Department), under Illinois Secretary
       of State Jesse White (Secretary), filed a notice of hearing alleging plaintiff, Richard Lee Van
       Dyke, d/b/a Dick Van Dyke Registered Investment Advisor, defrauded clients by
       recommending the sale of indexed annuities in violation of Illinois law. In April 2014, the
       Secretary found Van Dyke committed fraud, revoked his investment-adviser registration, and
       imposed a fine and other costs. Thereafter, Van Dyke filed a complaint for administrative
       review. In December 2014, the circuit court affirmed the final administrative order.
¶2         On appeal, Van Dyke argues (1) the Department had no jurisdiction over the marketing and
       sale of indexed annuities by insurance producers; (2) the Department failed to prove fraud and
       acted arbitrarily; and (3) the fines and penalties imposed were arbitrary, excessive, contrary to
       the evidence, and inconsistent with fines imposed in other cases. We reverse the circuit court’s
       decision and the Secretary’s final order.

¶3                                        I. BACKGROUND
¶4         At the relevant times in this case, Van Dyke was registered with the Department as an
       investment adviser. Investment advisers are regulated by the Department under the Illinois
       Securities Law of 1953 (Act) (815 ILCS 5/1 to 19 (West 2012)). Van Dyke was also licensed
       by the Illinois Department of Insurance as an insurance producer. Insurance producers are
       licensed and regulated by the Department of Insurance under the Illinois Insurance Code (215
       ILCS 5/1 et seq. (West 2012)).



                                                   -2-
¶5        In March 2013, the Secretary filed a notice of hearing to determine whether Van Dyke’s
     registration as an investment adviser should be retroactively revoked or suspended and
     whether he should be prohibited from offering or selling securities in the State of Illinois. As
     grounds for the proposed action, the Secretary alleged Van Dyke “defrauded over 21 clients,
     all of whom are senior citizens, of $263,822.13.” The Secretary also alleged as follows:
              “Dick Van Dyke recommended and sold 31 transactions that resulted in the early
              surrender of Indexed Annuities in order to purchase new Indexed Annuities. For these
              transactions Dick Van Dyke received $160,937.05 in commissions but his clients lost
              $263,822.13 in surrender charges, penalties and other fees. In addition, Dick Van
              Dyke, in all but one transaction, had sold the surrendered Indexed Annuity and had
              received $155,341.51 in commissions from the transactions.”
     The Secretary stated all of the purchase transactions reviewed by the Department involved
     persons age 58 or older at the time of the transactions, with the oldest person being 82. The
     Secretary alleged Van Dyke violated sections 12(A), (F), (G), (I), and (J) of the Act (815 ILCS
     5/12(A), (F), (G), (I), (J) (West 2012)).
¶6        Van Dyke filed a motion to dismiss, arguing the Department had no jurisdiction because
     section 2.14 of the Act (815 ILCS 5/2.14 (West 2012)) excluded indexed annuities from the
     Act’s definition of “security” and because he did not act as an investment adviser. The hearing
     officer denied Van Dyke’s motion, finding the indexed annuities were subject to the Act’s
     provisions and the notice alleged sufficient facts to impose sanctions against Van Dyke as an
     investment adviser.
¶7        Evidence presented at the administrative hearing indicated Van Dyke prepared financial
     plans for clients, in which he provided investment advice and recommendations for the sale
     and purchase of financial products, including indexed annuities. For example, Van Dyke
     provided a financial plan to a client, in which he identified himself as a registered investment
     adviser, recommended the sale and purchase of various investments (including indexed
     annuities), and represented the summary was based on his professional opinion as a registered
     investment adviser.
¶8        The relevant financial contracts at issue here are equity-indexed annuities. In contrast to
     traditional fixed annuities, indexed annuities offer, in addition to a minimum annual return, a
     potential return on the account value that is tied through a formula to the performance of one or
     a combination of selected stock market indexes, such as the S&P (Standard & Poor’s) 500
     stock index, NASDAQ (National Association of Securities Dealers Automated
     Quotations)-100 index, or FTSE (Financial Times Stock Exchange) 100 index.
¶9        In March 2014, the hearing officer filed his report and recommendation. Therein, he found
     the documents disclosed that from February 2009 through October 2010, Van Dyke effected
     33 indexed annuity purchase transactions involving the liquidation of 30 previously owned
     indexed annuity contracts by 21 of his clients, resulting in surrendered annuity contract
     commissions of $183,161.58, and $177,417.42 in new annuity contract commissions. The
     officer also found as follows:
              “Twenty-nine of the 30 previously-owned Indexed Annuity contracts had been
              recommended for purchase by [Van Dyke.] Five of 29 of the surrendered annuity
              contracts had eight years remaining until they could be surrendered without penalty, 20
              contracts had seven years remaining until they could be surrendered without penalty.
              Surrender penalty charges ranged from $2,078.39 to $21,291.66. Six surrendered

                                                 -3-
               contracts had bonus recapture fees that ranged from $2,232.01 to $8,940.48.
               Twenty-nine of the surrendered annuity contracts had positive market value
               adjustments. The contract value for the 30 surrendered Indexed Annuities totaled
               $2,327,904.95. However, the final amount credited to the 21 clients only totaled
               $2,246,897.59. Eleven of the 30 surrendered annuities resulted in eight clients having
               taxable income reported.”
¶ 10       The hearing officer also found all but one of the 33 new indexed annuities featured higher
       fees and the start of new surrender penalty periods. Eight of the new contracts had 12-year
       surrender penalty periods, twenty-one had 10-year surrender penalty periods, and four had
       6-year surrender penalty periods.
               “Twenty-four of the new Indexed Annuities had 10% bonuses, eight had 5% bonuses,
               and one had an 8% bonus. However, four of the new Indexed Annuity contracts
               required the owners to wait 15 years before having access to the full bonus value upon
               surrender, seven had to wait 12 years, 14 had to wait for 10 years, and four had to wait
               for six years. The four Indexed Annuity contracts that did not have bonus recapture
               periods provided that the owner may receive less than the premiums paid if the annuity
               contracts were surrendered within the surrender penalty periods.”
       The hearing officer found all 33 transactions were solicited and made at Van Dyke’s
       recommendation.
¶ 11       In his conclusions of law, the hearing officer found Van Dyke had violated section 12 of
       the Act, concluding Van Dyke’s actions, statements, representations, and/or omissions tended
       to work a fraud or deceit on Illinois purchasers; were untrue or misleading; and were
       fraudulent, deceptive, or manipulative.
¶ 12       In April 2014, the Secretary issued a final order adopting, in relevant part, the hearing
       officer’s recommended findings of fact and conclusions of law. Therein, the Secretary found
       Van Dyke was a registered investment adviser under the Act at all relevant times and
       “provided investment advice, financial planning and recommendations to purchase financial
       products including Indexed Annuities.” As a registered investment adviser, Van Dyke was
       under a fiduciary duty to act in the best interests of his clients. The Secretary found the indexed
       annuities are securities under the Act that, although exempt from registration with the
       Department, are subject to other provisions of the Act.
¶ 13       The Secretary found the indexed annuity transactions “were both unsuitable and not in the
       best interests of the clients due to the age of the clients, the surrender penalties incurred due to
       the early liquidation of the existing Indexed Annuity contracts, the frequency of the
       commissions paid and no derivation of additional tax benefits.” The Secretary found Van Dyke
       offered and sold at least 33 indexed annuities in violation of the Act and those transactions
               “worked or tended to work a fraud or deceit upon the purchasers thereof by
               representing to and misleading [his] clients who liquidated an existing annuity contract
               to purchase a new annuity contract that the surrender penalty charges to be incurred
               would be recovered by a positive market value adjustment, that the new annuity
               contract provided favorable bonuses and interest thereon, and that the new annuity was
               a better investment over their current annuity and in the client’s best interests.”
       Further, the Secretary found Van Dyke employed devices, schemes, or artifices to defraud in
       connection with the sale of securities by misleading his clients “that funds to purchase the new


                                                    -4-
       annuity did not come from an existing annuity, and that there were not any settlement fees,
       surrender charges or penalties of any kind.”
¶ 14       The Secretary found Van Dyke violated sections 12(A), (F), (G), (I), and (J) of the Act. The
       Secretary revoked Van Dyke’s investment-adviser registration, permanently prohibited him
       from offering or selling securities in Illinois, fined him $330,000 ($10,000 for each
       replacement annuity), and ordered him to pay $23,500 as costs of the investigation and the
       expert witness.
¶ 15       In April 2014, Van Dyke filed a complaint for administrative review. Therein, Van Dyke
       argued the Secretary’s decision was entered without jurisdiction and was contrary to the
       preponderance of the evidence.
¶ 16       On December 3, 2014, the circuit court affirmed the Secretary’s final administrative order.
       On December 26, 2014, the court issued a corrected order nunc pro tunc. Therein, the court
       affirmed the administrative decision and stated, in part, as follows:
               “The Court finds the Plaintiff was a registered investment advisor and while acting in
               that capacity caused significant financial losses to his clients by false and misleading
               investment advice. Further, the Court finds the new equity indexed annuities are
               securities under the Securities Law as demonstrated by the character and nature of the
               annuities, including the manner in which the annuities were promoted and the risk
               assumed by the clients. The Court rejects the argument that the annuities in question are
               entitled to exemption from the securities law as a form of insurance. Additionally, the
               Court finds that the Plaintiff’s conduct violated section [12(J)] of the Securities Law.
               Finally, the Court finds the record supports the findings made by the administrative law
               judge against the Plaintiff.”
       This appeal followed.

¶ 17                                          II. ANALYSIS
¶ 18                                      A. Standards of Review
¶ 19       On appeal, this court reviews the decision of the agency or department, not that of the
       circuit court. Gruwell v. Department of Financial & Professional Regulation, 406 Ill. App. 3d
       283, 288, 943 N.E.2d 658, 664 (2010). In administrative review cases, reviewing courts may
       encounter “questions of fact, questions of law, and mixed questions of fact and law.” Cinkus v.
       Village of Stickney Municipal Officers Electoral Board, 228 Ill. 2d 200, 210, 886 N.E.2d 1011,
       1018 (2008).
               “An administrative agency’s findings and conclusions on questions of fact are deemed
               prima facie true and correct. In examining an administrative agency’s factual findings,
               a reviewing court does not weigh the evidence or substitute its judgment for that of the
               agency. Instead, a reviewing court is limited to ascertaining whether such findings of
               fact are against the manifest weight of the evidence. An administrative agency’s factual
               determinations are against the manifest weight of the evidence if the opposite
               conclusion is clearly evident. [Citations.] In contrast, an agency’s decision on a
               question of law is not binding on a reviewing court. For example, an agency’s
               interpretation of the meaning of the language of a statute constitutes a pure question of
               law. Thus, the court’s review is independent and not deferential.” Cinkus, 228 Ill. 2d at
               210, 886 N.E.2d at 1018.


                                                   -5-
       “Mixed questions of fact and law are ‘questions in which the historical facts are admitted or
       established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory
       standard, or to put it another way, whether the rule of law as applied to the established facts is
       or is not violated.’ [Citation.]” American Federation of State, County & Municipal Employees,
       Council 31 v. Illinois State Labor Relations Board, State Panel, 216 Ill. 2d 569, 577, 839
       N.E.2d 479, 485 (2005). A decision on a mixed question of law and fact will not be reversed on
       appeal unless it is clearly erroneous. Evans v. State of Illinois, 2013 IL App (4th) 121082, ¶ 18,
       13 N.E.3d 752. “A decision is ‘clearly erroneous’ when the reviewing court is left with the
       definite and firm conviction that a mistake has been committed. [Citations.]” American
       Federation of State, County & Municipal Employees, 216 Ill. 2d at 577-78, 839 N.E.2d at 485.

¶ 20                                              B. The Act
¶ 21       “[T]he purpose of the [Act] is to protect innocent persons who might be induced to invest
       their money in speculative enterprises over which they have little control.” A.G. Edwards, Inc.
       v. Secretary of State, 331 Ill. App. 3d 1101, 1110, 772 N.E.2d 362, 370 (2002). “The law is
       paternalistic and is to be liberally construed to better protect the public from deceit and fraud in
       the sale of securities.” Carpenter v. Exelon Enterprises Co., 399 Ill. App. 3d 330, 334, 927
       N.E.2d 768, 772 (2010). To carry out these protections, section 12 of the Act prohibits
       fraudulent, deceptive, and manipulative conduct by investment advisers toward their clients.
       815 ILCS 5/12 (West 2012). Section 8(E)(1)(g) of the Act permits the Secretary to deny,
       suspend, or revoke an investment adviser’s registration for violations of any of the Act’s
       provisions. 815 ILCS 5/8(E)(1)(g) (West 2012). Moreover, section 11(E)(4) of the Act
       authorizes the Secretary to impose fines and costs of an investigation against the violator. 815
       ILCS 5/11(E)(4) (West 2012).

¶ 22                         C. Indexed Annuities as Securities Under the Act
¶ 23       Van Dyke argues the Department has no jurisdiction over the marketing and sale of
       indexed annuities by insurance producers and insurance companies authorized to transact
       business in Illinois. Van Dyke contends an indexed annuity is not a security under section 2.14
       of the Act (815 ILCS 5/2.14 (West 2012)) and it falls under the authority of the Department of
       Insurance to regulate annuity policies. In his brief, he states as follows:
               “The Securities Department has no experience or expertise to regulate Van Dyke or
               any other insurance producer. It has no rules, regulations, standards, guidelines, or
               other relevant criteria necessary to evaluate whether an insurance producer is meeting
               the suitability requirements of a particular insurance client.” (Emphasis in original.)
       In their brief, defendants argue indexed annuities are securities under the Act. Defendants
       contend indexed annuities are investment contracts that pose significant investment risks to
       clients and raise considerations not involved in traditional annuities.
¶ 24       We find indexed annuities are not securities under the Act. Under section 2.1 of the Act
       (815 ILCS 5/2.1 (West 2012)), the term “security” is defined to include a “face-amount
       certificate.” Section 2.14 of the Act (815 ILCS 5/2.14 (West 2012)) defines “face amount
       certificate” to include “any form of annuity contract (other than an annuity contract issued by a
       life insurance company authorized to transact business in this State).” Here, the indexed
       annuities in question are annuities issued by insurance companies authorized to transact


                                                    -6-
       business in Illinois. Thus, they are not securities under Illinois law. To hold otherwise would
       go against the plain language of the Act.
¶ 25       Our finding is bolstered by the fact the General Assembly declared variable
       annuities—which do not provide minimum guarantees and are the type of annuities most
       susceptible to being classified as securities—fall under the sole jurisdiction of the Department
       of Insurance. See 215 ILCS 5/245.24 (West 2012). It would make little sense for the legislature
       to place variable annuities out of the reach of the Securities Department but then subject
       annuity products such as indexed annuities to securities regulation.
¶ 26       We also note the Department’s ruling that indexed annuities are securities lacks any
       reasoned explanation in its administrative order. “The grounds upon which an administrative
       order must be judged are those upon which the record discloses that its action was based.”
       Securities & Exchange Comm’n v. Chenery Corp., 318 U.S. 80, 87 (1943). Arguments made
       for the first time on appeal may not be used to support the agency’s action because “courts may
       not accept appellate counsel’s post hoc rationalizations for agency action.” Burlington Truck
       Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).
¶ 27       In the administrative order, the Secretary stated as follows:
                “The Indexed Annuities that are the subject of this Matter are securities subject to the
                Act. Although an Indexed Annuity is exempt from registration with the Department,
                the offer or sale of an Indexed Annuity is still subject to the other provisions of the
                Act.”
       This is the Department’s entire explanation as to why indexed annuities constitute securities.
¶ 28       “The necessity for administrative agencies to provide a statement of reasons *** is a
       fundamental principle of administrative law.” Brooks v. Atomic Energy Comm’n, 476 F.2d
       924, 926-27 (D.C. Cir. 1973). Here, however, the Department fails to explain what an indexed
       annuity is, why indexed annuities fall within the definition of “security,” or why it departed
       from the statutory language that annuities issued by insurance companies fall outside the
       definition of “security” and are regulated instead as insurance products. Moreover, it should be
       noted the Department attempts to define securities to include indexed annuities in a
       disciplinary proceeding, as opposed to the rulemaking process that would be subject to
       comment and challenge.
¶ 29       Defendants note that, even if indexed annuities are not to be considered securities, the
       Secretary also determined Van Dyke violated section 12(J) of the Act (815 ILCS 5/12(J) (West
       2012)) by engaging in fraudulent or manipulative conduct as an investment adviser, which
       does not require the sale of securities. According to section 12(J) of the Act, it is a violation for
       a person:
                “When acting as an investment adviser, investment adviser representative, or federal
                covered investment adviser, by any means or instrumentality, directly or indirectly:
                        (1) To employ any device, scheme or artifice to defraud any client or
                    prospective client;
                        (2) To engage in any transaction, practice, or course of business which operates
                    as a fraud or deceit upon any client or prospective client; or
                        (3) To engage in any act, practice, or course of business which is fraudulent,
                    deceptive or manipulative.” 815 ILCS 5/12(J) (West 2012).


                                                     -7-
¶ 30       In the case sub judice, Van Dyke disputes he acted as an investment adviser under section
       12(J) of the Act. However, the Secretary’s determination that Van Dyke acted as an investment
       adviser in the transactions at issue is supported by the record. Van Dyke was a registered
       investment adviser under the Act at all relevant times, and he marketed and otherwise held
       himself out to clients as a registered investment adviser, “Certified Senior Adviser,” and
       “nationally recognized retirement educator.” Moreover, the Insurance Code does not prohibit
       licensed insurance producers from also acting as investment advisers when selling indexed
       annuities. 215 ILCS 5/500-15(a), (b)(2) (West 2012). Because Van Dyke acted both as a
       registered investment adviser under the Act and as a licensed insurance producer under the
       Insurance Code, he was subject to the legal duties under each regulatory regime, including the
       Act’s antifraud provisions.
¶ 31       Van Dyke also contends section 12(J) (815 ILCS 5/12(J) (West 2012)) requires that he
       provide the offending advice “for compensation.” See 815 ILCS 5/2.11 (West 2012) (defining
       “investment adviser” under the Act). However, the evidence indicates one client paid him a
       $1975 retainer for future investment advice and he received over $360,000 in commissions for
       the sales of the annuities. Thus, he provided such advice for compensation.

¶ 32                                       D. Findings of Fraud
¶ 33       Van Dyke argues the Department failed to prove fraud and it acted arbitrarily or, in the
       alternative, any findings of fraud are against the manifest weight of the evidence. We agree.
¶ 34       In an administrative hearing, the Department’s burden of proof is by a preponderance of
       the evidence. 5 ILCS 100/10-15 (West 2012). “An administrative decision should not be
       overturned unless the agency exercised its authority in an arbitrary and capricious manner or
       the decision is contrary to the manifest weight of the evidence.” Springwood Associates v.
       Health Facilities Planning Board, 269 Ill. App. 3d 944, 947, 646 N.E.2d 1374, 1375 (1995).
¶ 35       In determining whether an agency acted arbitrarily, it must be remembered that
       “administrative agencies must follow their own rules as written, without making ad hoc
       exceptions or departures therefrom in adjudicating.” Springwood Associates, 269 Ill. App. 3d
       at 948, 646 N.E.2d at 1376. “Agency action is arbitrary and capricious if the agency
       contravenes the legislature’s intent, fails to consider a crucial aspect of the problem, or offers
       an explanation which is so implausible that it runs contrary to agency expertise.” General
       Service Employees Union, Local 73 v. Illinois Educational Labor Relations Board, 285 Ill.
       App. 3d 507, 515, 673 N.E.2d 1084, 1090 (1996).
¶ 36       Here, we find the Secretary’s decision is arbitrary, capricious, and against the manifest
       weight of the evidence. The Department failed to set forth any applicable rules or written
       criteria to evaluate insurance annuities that would indicate its expertise in that area. In contrast,
       the Department of Insurance has enacted detailed regulations addressing suitability factors that
       insurance producers and insurance companies must adhere to when offering or selling
       annuities, including replacement annuities, to Illinois consumers. See, e.g., 50 Ill. Adm. Code
       3120.50 (2011) (setting forth the duties of insurers and insurance producers in recommending
       a purchase of a security); 50 Ill. Adm. Code 909.85 (2008) (setting forth provisions regarding
       advertising and marketing annuities). The purpose of the suitability regulations “is to set forth
       standards and procedures for recommendations by insurers or insurance producers to
       consumers that result in a transaction involving annuity products so that the insurance needs


                                                     -8-
       and financial objectives of consumers at the time of the transaction are appropriately
       addressed.” 50 Ill. Adm. Code 3120.10 (2011).
¶ 37        In the final order, the Secretary did not identify any regulation other than section 130.853
       of title 14 of the Illinois Administrative Code (14 Ill. Adm. Code 130.853 (1997)), which states
       as follows:
                 “Effecting or causing to be effected by or for any client’s account, any transactions of
                 purchase or sale which are excessive in size or frequency or unsuitable in view of the
                 financial resources and character of the account, shall constitute an act, practice, or
                 course of business on the part of the registered investment adviser or its representative
                 effecting such transactions or causing the transactions to be effected that is fraudulent,
                 deceptive or manipulative.”
       However, section 130.853 has nothing to do with an insurance producer selling an annuity to
       an insurance client. Van Dyke did not manage any accounts for his insurance clients. He acted
       as an insurance agent in the facilitation of the sale of insurance contracts.
¶ 38        Ray DeWitt, the Department’s securities enforcement director, testified he participated in
       Van Dyke’s audit. He compared the aggregate “dollar amounts” of the old annuities to the new
       annuities and included columns for both the new contract with a bonus and the new contract
       without a bonus. When asked why he made the distinction between the bonus or lack thereof,
       DeWitt stated he was told to do so by the Department’s attorney, David Finnegan. He stated
       “the Department doesn’t recognize a bonus as a reason for switching an annuity.” The
       Department, however, fails to cite a rule or regulation to support this view.
¶ 39        The evidence presented by the Department also fails to show Van Dyke fraudulently
       induced 21 clients to purchase replacement annuities. The Department’s “evidence” involved
       looking at replacement annuities containing surrender charges and bonus recapture fees and
       adding up the numbers. Susan Lamb, an associate actuary for the Department of Insurance,
       testified she was familiar with the suitability requirements for the replacement of indexed
       annuities. She also stated as follows:
                 “The adviser needs to consider the individual’s financial situation. Every individual’s
                 financial situation is unique, they have different needs, they have different
                 expectations. They also need to very clearly consider the features in the current annuity
                 contract versus the features in the potential replaced contract.”
¶ 40        Here, there was no consideration as to whether the new annuities were suitable based on
       each individual client’s unique needs and financial status. DeWitt testified he did not take into
       consideration any of the features of the new annuities that were not included in the old
       annuities. Instead, he “was just putting hard numbers down.” He also stated he did not conduct
       “any analysis” of the annuities. Dr. Edward O’Neal, a Department consultant, testified he did
       not review any of the individual annuity contracts or other documents to compare the features
       of the original annuities to the new annuities. Instead, he only considered the surrender charges
       and the market value adjustment. Thus, DeWitt and O’Neal both admitted they neither
       performed nor were asked to perform the individualized suitability comparison described by
       the insurance expert Lamb.
¶ 41        It should also be noted that of the 14 Van Dyke clients who testified, none of them had any
       complaints. All of Van Dyke’s clients reviewed and signed application forms, rider forms, and
       contract forms approved by the Department of Insurance acknowledging they were aware of


                                                    -9-
       the various benefits, features, surrender charges, and fees associated with the replacement
       annuities. As just one example, George Perry testified he was not satisfied with the
       performance of his ING annuity, and Van Dyke suggested an annuity with Aviva. Perry stated
       Van Dyke explained the surrender penalty on the ING annuity but “there was a bonus on the
       Aviva which more than made up for the loss in the early retirement.” Perry stated he made the
       decision to switch and he “came out ahead on the deal,” as the value of the Aviva annuity had
       gone up “drastically.”
¶ 42       We find the evidence presented failed to establish Van Dyke violated the Act in the sale of
       the indexed annuities in this case and, more specifically, that he perpetrated a fraud on his
       clients. As such, the Secretary’s final order revoking Van Dyke’s investment adviser
       registration, prohibiting him from offering or selling securities in Illinois, fining him $330,000,
       and requiring him to pay witness fees of $23,500 must be reversed.

¶ 43                                    III. CONCLUSION
¶ 44      For the reasons stated, we reverse the circuit court’s decision and the Secretary’s final
       order.

¶ 45      Reversed.




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