- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
A firm settled FINRA charges for failing to properly supervise certain types of variable annuity transactions and to monitor variable annuity exchanges.
In a Letter of Acceptance, Waiver, and Consent, FINRA stated that the firm's reviewing principals could not reasonably determine the suitability of a variable annuity exchange because the firm did not analyze material information regarding (i) living benefit riders and (ii) buffer annuities. Specifically, FINRA found that the firm did not:
- include on its disclosure forms a comparison of the existing annuity's living benefit value and the potential loss of value due to the exchange;
- require its registered representatives to enter the living benefit value into the firm's electronic system; and
- ensure that customers were informed of key features of the buffer annuity.
Additionally, FINRA found that the firm could not determine which exchanges required further review because (i) its monthly reports did not monitor rates of exchanges, (ii) the firm did not designate an individual responsible for surveilling exchanges and (iii) the firm did not provide guidance for determining "excessive" rates of exchanges.
As a result, the firm violated FINRA Rules 3110(a) and (b) ("Supervision"), 2330(c) and (d) ("Members' Responsibilities Regarding Deferred Variable Annuities") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure and (ii) a $100,000 fine.
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