SEC Tells VA Insurers: Dont Pretend There Are No Problems
For the well-being of the industry, variable annuity insurers must confront abusive sales practices and work to effect change for the benefit of investors, said a senior Securities and Exchange Commission official.
“The variable products industry cannot pretend that there are no problems,” said Paul F. Roye, director of SECs division of investment management.
“You should be as appalled as we are when you read about any instances of these abusive sales practices,” he said in remarks to the Regulatory Affairs Conference of the National Association for Variable Annuities.
Roye specifically took issue with a NAVA response to the joint report recently released by the SEC and the National Association of Securities Dealers outlining improper sales practices in the variable annuity industry. The report was accompanied by a proposed new rule creating enhanced suitability and disclosure requirements on variable products.
NAVAs response was that the report provides “no indication” of widespread abuses.
But Roye countered that the report noted that regulators have received a large number of complaints from individual investors. Many of these complaints, he noted, indicate that the customer was sold a variable product without fully understanding it or that the product was not appropriate for the customers investment objectives and liquidity needs.
Indeed, he added, there were reports of brokers making unsuitable recommendations to senior citizens and to individuals who could not afford the product without mortgaging their homes.