The National Association of Securities Dealers has suspended a firm from participating in the variable life and variable annuities business for 30 days in connection with allegations about procedural problems.
The NASD, Washington, also has imposed a $400,000 fine on the firm, David Lerner Associates Inc., Syosset, N.Y.
David Lerner agreed to the settlement without admitting or denying the charges, the NASD says.
“The firm worked with the NASD to bring closure to the matter,” says Daniel Chafetz, David Lerner’s chief compliance officer.
The variable products business made up only a small portion of David Lerner’s business, and the firm has revised its policies and procedures to keep similar problems from occurring in the future, Chafetz says.
New York State Insurance Department Regulation 60 requires companies to interact with holders of variable annuities or variable life insurance policies 2 separate times before replacing those products, to give the customers time to think about their decisions.
The NASD says an investigation found that David Lerner got around Regulation 60 between November 1998 and February 2004 by having customers sign the “step 1″ and “step 2″ documents but leave the documents undated. Later, company employees sent the Regulation 60 documents to an employee who completed the paperwork and added fake dates, officials say.
David Lerner completed 527 variable life replacement sales and 259 variable annuity replacement sales to New York residents during the period investigated, officials say.
The variable life replacement sales generated more than $3.4 million in revenue, and the variable annuity replacement sales generated about $1.4 million in revenue, officials say.
A copy of a press release announcing the NASD actions is on the Web at Document Link