Gilman Ciocia logoFines and legal costs took a bite out of Gilman Ciocia's cash during the year ended July 31. However, the financial planning and tax preparation firm was successful in getting proposed fines substantially reduced in Florida, where it has faced ongoing legal issues regarding variable annuities sold a few years ago. Meanwhile, the company was able to sharply cut its losses for fiscal 2012, although revenue dropped slightly.


On April 12, Florida's Office of Financial Regulation began an administrative proceeding against company's subsidiary, PCS, Asset & Financial Planning, a registered investment advisor and three PCS registered representatives of PCS. The action stemmed from the alleged impact of management fees on the bonus provisions of a rider on 55 customer variable annuities between 2007 and 2010. The defendants, however, said the problem was an administrative error and no customers suffered harm. The Florida agency had sought administrative fines of $575,000 from PCS, $238,500 from AFP and $323,500 from the registered representatives. However, a settlement reduced the total to $70,000 in fines and costs of $30,000. The parties have not yet determined the allocation of those.

Gilman was similarly successful in reducing the potential of impact of lawsuit by the OFR against the same parties. Florida sought to enjoin them from violating the Florida Securities and Investor Protection Act and wanted restitution for customers. The case was settled with Gilman, PCS and the representatives agreeing to pay $100,000 in restitution. The case was dismissed with prejudice, meaning it cannot be refiled. However, these actions cost the company $490,000 in legal costs and expenses. Gilman said it had recorded a receivable from Registered Representatives for the share of the costs, but did not specify the amount.

Meanwhile, the company said attrition among its financial advisors and a decline in money under management were factors in its financial results for the most recently ended year. Gilman lost $687,000, down sharply from losses of $1.8 million for fiscal 2011. However, revenue for 2012 fell to $40.4 million, off 2.7 percent from $41.5 million the prior year. Brokerage commission revenue, the biggest source of Gilman's income, fell to $22.7 million, down 1.4 percent from just over $23 million. Gains from commissions on variable annuities and trails could not offset declines on those from mutual funds, equities, bonds, unit trusts and other sources.

Fees from tax preparation and accounting services rose to just under $8 million, up 3.5 percent for $7.7 million for 2011. While revenue from that source rose slightly as a percentage of overall income, the amounts come completely from company-owned offices and represent 31 percent of revenue from those locations.

Last modified on Sunday, 02 June 2013
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