Waddell & Reed Financial Inc. says it will spend about $32.5 million to settle litigation triggered by past efforts to cut ties with another financial services company.[@@]
Waddell & Reed, Overland Park, Kan., a money manager and broker-dealer, has been facing a number of lawsuits and regulatory investigations as a result of efforts in 2001 and 2002 to exchange about 6,700 variable annuities written by United Investors Life Insurance Company, a unit of Torchmark Corp., Birmingham, Ala., for annuities written by another insurer.
Torchmark acquired Waddell & Reed and United Investors, which once was a Waddell & Reed subsidiary, in the 1980s. Torchmark turned Waddell & Reed into a separate company in 1998, but Torchmark kept United Investors.
In 2001 and 2002, Waddell & Reed exchanged 6,700 variable annuities written by United Investors for annuities written by another company.
NASD officials and state officials have argued that the exchanges forced Waddell & Reed customers to pay about $11 million in surrender charges and may have been unsuitable for many of the customers involved.