FINRA keeping busy with enforcing annuity sales misdeeds

Suitability sales issues continue to be an problem for an aging nation, and the NAIC has weighed in after a Government Accountability Office (GAO) report warning on suitability questions involving insurance and investment product sales to veterans. The Financial Industry Regulatory Authority (FINRA) has been actively enforcing all manner of annuity transaction misdeeds nationwide on as regular of a basis as any state insurance department, according to recent enforcement reports from the agency.

Recently, FINRA censured a firm and fined it $40,000 to settle allegations (not admitted or denied) that, among other things, the firm failed to gather and maintain required documentation about variable annuity transactions and the customers. Sampled transactions of the firm, Allied Beacon Partners, Inc., Richmond, Va., lacked certain customer information or documentation needed in order to make a reasonable suitability determination, FINRA alleged in its consent order description of enforcement actions rounded up in October.

“A large portion of variable annuity transactions sampled revealed the firm’s failure to ensure that a designated principal adequately reviewed and approved the customer’s application prior to its transmission to the issuing insurance company,” FINRA wrote.

FINRA contended that the firm’s Written Supervisories (WSPs) for variable annuity transactions were deficient. The WSPs identified one individual as having the responsibility to supervise variable transactions, but another individual not identified in the WSPs was actually the primary person responsible for supervising VA transactions, FINRA found.

The findings also included that the WSPs did not address how the firm would monitor compliance with SEC Rule 15c2-8, which requires that a prospectus be delivered to customers. Of transactions FINRA staff sampled, the firm was unable to provide any documentation demonstrating that a prospectus was sent to any of the customers, FINRA alleged.