The Financial Industry Regulatory Authority has imposed a $100,000 fine on an insurer-affiliated investment firm over a former broker’s strategy for selling variable universal life insurance.
Ameritas Investment Corp., Lincoln, Neb., a unit of UNIFI Mutual Holding Company, Lincoln, Neb., has agreed to pay the fine to resolve FINRA’s concerns.
From October 2003 to December 2005, the former broker urged consumers to take out additional mortgage debt or home equity debt to buy VUL policies, FINRA officials say.
The broker recommended the mortgage debt-funded VUL arrangements as vehicles for saving for college expenses and retirement, officials say.
When FINRA learned about the arrangements, it found that the broker’s financial plans were misleading and that some of her VUL purchase recommendations were unsuitable. FINRA fined the broker $60,000 and suspended her for 9 months, officials say.
About 90 of the 220 consumers who received the broker’s plans ended up buying VUL policies from Ameritas, and 6 of the VUL policy sales were found to be unsuitable, officials say.
FINRA sanctioned Ameritas for failing to adequately supervise the broker and for advertising violations related to the financial plans, officials say.
“Brokerage firms must exercise vigilance when their brokers recommend that customers use mortgage proceeds to purchase securities,” Susan Merrill, FINRA’s enforcement chief, says in a statement. “FINRA will aggressively pursue firms and individuals who use misleading financial plans to induce customers to purchase securities, particularly when those plans propose that customers refinance their homes or take out home equity loans to pay for the purchase of securities.”
Before FINRA took action, Ameritas “rescinded the VUL policies purchased by the 6 customers who received unsuitable recommendations and refunded their premium payments,” FINRA officials report.
Ameritas and the broker have neither admitted nor denied FINRA’s charges, but they have agreed to allow FINRA to enter its findings.
UNIFI is glad to have the matter behind it, company spokesman Scott Stuckey says.
The matter “only involved one single broker,” Stuckey says. “The broker has not been with Ameritas since January of 2006.”
Ameritas has cooperated with FINRA, Stuckey says.