Jefferson Pilot Variable Corp. has become the first broker/dealer to be fined by the NASD for market timing in its variable universal life (VUL) insurance policies. The Concord, New Hampshire-based B/D must pay $325,000 for not having an adequate supervisory system in place to prevent marketing timing and excessive trading in the subaccounts of its Ensemble series of VULs. The firm must also pay $238,697 in restitution to investors of the affected funds. Those two fines combined total more than $500,000. That’s not all. Jefferson Pilot Securities Corp. was fined $125,000 for e-mail retention violations.
According to the NASD, Jefferson Pilot failed to determine whether its electronic system that is designed to recognize and block subaccount transfers in excess of policy limits was functioning. As a result, “292 Ensemble series VUL policyholders were permitted to exceed the 20-transfers-per-policy-year limit described in the prospectus,” the NASD said.