Nationwide Life Insurance Co. has agreed to pay $8 million to the Securities and Exchange Commission to settle charges that the company violated pricing rules for more than 15 years in daily processing of purchase and redemption orders for variable insurance contracts and underlying mutual funds.
According to the SEC’s order instituting a settled administrative proceeding, Nationwide’s prospectuses stated that mutual fund orders received before 4 p.m. at its home office in Columbus, Ohio, would receive the current day’s price. Orders received after 4 p.m. would receive the next day’s price.
However, the SEC states that an investigation by the agency found that when regular postage mail became available for retrieval early each morning from its P.O. boxes, Nationwide arranged for the pickup and delivery of mail directed to other business units but intentionally delayed the retrieval of mail related to its variable contracts business.
Despite “receiving customer orders and other variable contract mail in its P.O. boxes at least several hours before the 4 p.m. cut-off time, Nationwide sought to avoid its requirement to process the orders contained in this mail using the current day’s price by ensuring this mail wasn’t delivered to its offices until after 4 p.m.,” the SEC states. “Meanwhile, Nationwide did arrange for prompt pickup and delivery of U.S. Postal Service Priority Mail or Priority Express Mail that enabled contract owners to track an order’s time of delivery to the P.O. boxes. Those orders were assigned the current day’s price.”
For more than 15 years, “Nationwide intentionally delayed the delivery of untracked mail containing orders from customers and processed them at the next day’s prices in violation of the law,” said Sharon Binger, director of the SEC’s Philadelphia Regional Office, in a statement.