Moynul Haque/Adobe Stock
Cambridge Investment Research has agreed to pay a $150,000 fine to the Financial Industry Regulatory Authority and $129,939 in restitution plus interest to affected customers for failing to surveil rates of deferred variable annuity exchanges.
According to FINRA's order, from at least January 2018 to February 2025, Cambridge lacked a supervisory system, including written supervisory procedures, to monitor rates of such exchanges. As a result, the firm failed to detect 22 "inappropriate exchanges," as defined in FINRA Rule 2330(d), by a former registered representative that caused 14 customers to incur $129,939 in unnecessary surrender fees.
Cambridge of Fairfield, Iowa, has about 4,900 registered reps and 2,800 active branches.
As FINRA explains, deferred variable annuities are hybrid investments containing securities and insurance features that permit investors to choose among a variety of contract features and options. Due in part to the complexity of these products, FINRA requires that firms provide more comprehensive and targeted protection to investors who purchase or exchange them.
During the affected period, the firm "had no report, alert, or other system or review that surveilled for its representatives' deferred variable annuity exchange rates, and Cambridge's WSPs did not provide for the assessment of its representatives' rates of exchange or provide any other procedures to determine if its registered representatives had inappropriate exchanges," according to FINRA.
Nor did the firm have policies or procedures reasonably designed to implement corrective measures to address inappropriate exchanges.
In February 2025, Cambridge revised its WSPs, including by implementing procedures and surveillance to review deferred variable annuity exchange rates and enhance supervision of variable annuity surrenders with surrender charges, according to the order.
In the seven years cited in the order, the broker-dealer self-regulator found, Cambridge violated FINRA Rules 2330, 3110 and 2010.
Credit: Moynul Haque/Adobe Stock
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