Horace Mann Investors, Inc., has agreed to provide settlement payments to customers with IRA accounts opened by one of its registered representatives, Dieter Hofmann.
In 2016, the State of Delaware moved its deferred compensation plans from numerous independent service providers, including Horace Mann, to one provider, Voya Financial. More than 120 teachers with 403(b) accounts with Horace Mann opened Individual Retirement Accounts 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 opening of these IRAs and both Horace Mann and Dieter Hofmann cooperated with IPU in connection with its multi-year investigation. The office alleged and concluded that Hofmann engaged in dishonest and unethical practices in violation of the Delaware Securities Act.
The office alleged that Dieter Hofmann took unfair advantage of his customers with individuals who were confused about the transition to Voya by providing them with inadequate or inaccurate information. The state alleged that Horace Mann failed to sufficiently supervise Hofmann. The Delaware Office of the State Treasurer provided assistance in connection with the investigation.
The investigation was resolved pursuant to the terms of administrative consent orders dated December 30, 2019 with Hofmann and Horace Mann. Neither 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.
The state and Horace Mann agreed that Horace Mann will provide settlement payments for certain customers to compensate those customers for potential lost earnings. 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.
“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.”
