Better watch out for variable insurance prospectuses that fail to make allowances for policyholders who want to rebalance their portfolios.[@@]
The National Association of Securities Dealers Inc. today imposed $450,000 in fines on 2 units of Jefferson-Pilot Corp., Greensboro, N.C., in connection with concerns about administration of Ensemble variable universal life subaccounts.
The policy prospectus limits each policyholder to 20 transfers per policy year.
Jefferson-Pilot spokesman Paul Mason notes that Jefferson-Pilot’s own compliance team identified the problems and reported them to NASD.
Although the compliance team discovered 2 actual market timers, who generated about $239,000 in extra profits by making dozens of trades over the 20-trade limit, the team also found 290 policyholders who were simply rebalancing their portfolios.
“Although not market timers, those policyholders still exceeded the VUL prospectus transfer limitations,” NASD says.
NASD says it is imposing $325,000 in fines on Jefferson Pilot Variable Corp., the Jefferson-Pilot unit that supervises the Ensemble subaccounts, because it relied too heavily on an electronic system that was supposed to catch violations of the rules on transfer limits.
Jefferson Pilot Variable also must pay about $239,000 in restitution to the 3 subaccounts affected by the marketing timing.