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A firm settled FINRA charges for supervisory failures over variable annuity ("VA") contracts.
In the Letter of Acceptance, Waiver and Consent, FINRA found that, while the firm monitored VA transactions for inappropriate rates of exchanges, the firm's written supervisory procedures (i) did not detail when or how frequently the review of VA exchanges would be completed and (ii) did not provide guidance regarding what constituted a "high rate" of VA replacements. According to the findings, the firm also did not have a system in place for corrective actions to address inappropriate exchanges and did not record all executed VA transactions (i.e., not all VA exchange transactions were reviewed).
Further, FINRA found that the firm required the principal approval of only "qualified" VAs, thereby failing to review solicited transactions involving additional investments into "non-qualified" VAs. FINRA also found that the firm failed to timely report statistical and summary information for over 170 written customer complaints.
As a result, the firm violated FINRA Rules 2330(d) ("Members' Responsibilities regarding Deferred Variable Annuities; Supervisory Procedures"), 3110 ("Supervision"), 2010 ("Standards of Commercial Honor and Principles of Trade") and 4530(d) ("Reporting Requirements").
To settle charges, the firm agreed to a (i) censure and (ii) $350,000 fine.
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