Close Close

Regulation and Compliance > Federal Regulation > FINRA

FINRA levies $6.2 million in variable annuity L-share fines

Your article was successfully shared with the contacts you provided.

The Financial Industry Regulatory Authority fined eight companies a total of $6.2 million for failing to supervise sales of L-share variable annuities.

Five of the companies must pay more than $6 million to customers who purchased L-share variable annuities with potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders, FINRA said in a release.

The L-shares involved in the action combine insurance and security features designed for short-term investors willing to pay higher fees in exchange for shorter surrender periods. The products also had the potential to pay out greater compensation to the companies and registered representatives than traditional share classes.

FINRA said the companies lacked an adequate system to supervise variable annuities with multiple share classes and failed to provide reasonable guidance about the narrow class of customers for whom the cost and features of L-share variable annuities were suitable.

“The complexity and expense of variable annuities require exceptional diligence in the training and supervision of the representatives who sell them and of the sales themselves,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a press release. “When a firm cannot explain why a significant number of clients are paying up for the short-term flexibility of L-shares while at the same time buying riders that only have value over the long term, it is clear that these supervisory obligations are not being met.” 

The companies did not admit or deny the charges in settling the matters, but consented to the entry of FINRA’s findings.

The companies included in the action were:

      • Cetera Advisor Networks, El Segundo, California.
      • Cetera Financial Specialists, Schaumburg, Illinois.
      • First Allied Securities, San Diego.
      • FTB Advisors, Memphis, Tennessee;
      • Kestra Investment Services, Austin, Texas.
      • Summit Brokerage Services, Boca Raton, Florida.
      • Voya Financial Advisors, Des Moines, Iowa.
      • VSR Financial Services, Overland Park, Kansas.

See also:

FINRA close to filing fraud rule for ‘vulnerable’ investors

FINRA fines Prudential Financial VA unit

FINRA to focus on senior suitability annuity sales

We’re on Facebook, are you?