Principal Ordered to Pay $7.3M to Medical Research Foundation
The foundation says the company let an advisor recommend unsuitable life and annuity products.
A Financial Industry Regulatory Authority arbitration panel has ordered Principal Securities to pay about $7.3 million in compensatory damages and interest to the Rosenau Family Research Foundation and three beneficiaries of two related trusts.
FINRA denied the claimants’ request for punitive damages, attorneys’ fees and other damages.
Principal Securities is a subsidiary of Principal Financial.
Paul Rosenau won a Powerball lottery in 2008 exactly five years after the days his 2-year-old granddaughter Makayla died from Krabbe disease, a rare genetic disorder. The Rosenaus discovered that a gene for cystic fibrosis also ran in the family, according to the foundation website.
Paul Rosenau received a lump sum payment of about $60 million. He and his wife, Susan Rosenau, used $26.4 million of the winnings to start the foundation, to support research on both Krabbe disease and cystic fibrosis. In 2023, for example, the foundation awarded grants to University of Illinois researchers who are trying to develop a gene therapy strategy for treating Krabbe disease.
The foundation and other claimants told arbitrators that a Principal advisor who died in 2020 caused them to invest in unsuitable variable annuities and unsuitable life insurance policies, and that high investment costs associated with the products were not disclosed.
The claimants asserted that Principal Securities had violated federal and state laws and regulations, including fiduciary duty requirements, and that Principal Securities had failed to reasonably supervise its registered representative. The claimants asked for $23 million in compensatory damages.
Principal denied the allegations, according to the arbitration panel’s case summary.
The trusts with beneficiaries listed as claimants along with the Rosenau Foundation are the Paul and Sue Rosenau Family Delaware Dynasty Trust and the Paul and Susan Rosenau 2012 Irrevocable Life Insurance Trust.
The arbitration panel allocated $13,613 of the arbitration hearing fees to the claimants and $16,875 of the fees to Principal Securities.
Representatives from Principal and the Rosenau Foundation were not immediately available to comment on the arbitration award.
Credit: FINRA