The Financial Industry Regulatory Authority has fined Supreme Alliance $80,000 for failing to supervise purchases of deferred variable annuities and rates of VA exchanges as well as failing to document registered reps' background checks.
Supreme Alliance, based in Charlotte, North Carolina, distributes mutual funds and variable life insurance or annuities. It has about 40 registered reps across four active branches.
According to FINRA's order, between September 2019 and May 2022, Supreme Alliance failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to supervise recommendations of purchases and exchanges of deferred variable annuities and supervise the conduct and documentation of investigations into newly hired registered reps.
"Further, the firm failed to surveil for inappropriate rates of variable annuity exchanges," the order states.
Supreme Alliance also failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to supervise recommendations of deferred variable annuity purchases and exchanges to achieve compliance with Rule 2330 and Regulation Best Interest, FINRA said.
The firm failed to establish and maintain a system or WSPs reasonably designed to supervise whether the firm’s registered reps "made reasonable efforts to obtain customer profile information and other information needed to reasonably assess the suitability of a transaction and whether those transactions were in the customers’ best interests, including customers’ risk tolerances and information about lost rider benefits," before recommending the purchase or exchange of deferred VAs.
During the same time period, the firm also failed to implement surveillance procedures to identify if any of its registered reps had inappropriate exchanges.
"The firm did not maintain policies or guidance explaining how the firm would monitor rates of deferred variable annuity exchanges, including who was responsible for such surveillance, how often it would take place, what tools to use to conduct the surveillance, or what parameters to consider when evaluating whether exchange rates were inappropriate," the order states.
Inaccurate Fees, Costs, Surrender Periods
The firm "also did not have a system or procedures sufficient to supervise whether there was a reasonable basis to believe that customers were accurately informed about various features of the deferred variable annuities they were recommended," and as a result, firm supervisors approved annuity transaction applications listing inaccurate costs, fees, surrender periods and rider information, FINRA found.
"Supreme Alliance also failed to document principal review and approval of multiple variable annuity applications submitted during the relevant period," the order states.
Further, between June 30, 2020 and April 25, 2022, Supreme Alliance failed to establish, maintain and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.
"The firm’s written policies and procedures contained no provisions relating to Reg BI during that period," the order states.
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