NU Online News Service, June 15, 2004, 7:44 p.m. EDT, Washington – For the well-being of the industry, variable annuity insurers must confront abusive sales practices.[@@]
Paul Roye, director of the investment management division at the U.S. Securities and Exchange Commission, made that suggestion in remarks to the Regulatory Affairs Conference of the National Association for Variable Annuities, Reston, Va.
“The variable products industry cannot pretend that there are no problems,” Roye said. “You should be as appalled as we are when you read about any instances of these abusive sales practices.”
Roye specifically took issue with a NAVA response to a report recently released by the SEC and NASD, Washington, that described improper sales practices in the variable annuity industry.
The report was accompanied by a proposed rule that would update variable product suitability and disclosure requirements.
NAVA said the report provided no indication of widespread abuses.
But Roye said the authors of the report noted that regulators have received a large number of complaints from individual investors. Many of these complaints indicate that the customer was sold a variable product without fully understanding it or that the product was not appropriate for the customer’s investment objectives and liquidity needs, Roye said.
There also were reports of brokers making unsuitable recommendations to senior citizens and to individuals who could not afford the product without mortgaging their homes, Roye added.