NU Online News Service, June 6, 2003, 12:01 p.m. EDT – The enforcement arm of the National Association of Securities Dealers, New York, may “bring an action” against Waddell & Reed Inc., the broker-dealer subsidiary of Waddell & Reed Financial Inc., Overland Park, Kan., according to Waddell & Reed Financial.
NASD officials are questioning the suitability of some exchanges of variable annuities issued by a unit of Torchmark Corp., Birmingham, Ala., to Waddell & Reed clients for variable annuities issued by another company, Waddell & Reed Financial says in a report filed with the U.S. Securities and Exchange Commission.
The exchanges took place between January 2001 and August 2002, after the Torchmark unit terminated a distribution agreement with the broker-dealer unit, Waddell & Reed Financial says.
In addition to questioning the suitability of some of the annuity exchanges, NASD officials are questioning the adequacy of the supervisory systems that Waddell & Reed had in place at the time, Waddell & Reed Financial says.
The notification that the NASD may bring action stems from a sales practice exam that the NASD started in April 2001, Waddell & Reed Financial says.
Waddell & Reed Financial notes that United Investors Life Insurance Company, the Torchmark unit that originally issued the annuities, has sued it in Alabama and California over the annuity exchanges and related issues.