Financial Firms Fined Over Variable-Annuity Contracts
November 02 2016 - 06:20PM
Dow Jones News
Wall Street's self-regulator fined eight financial firms more
than $6 million and ordered five of them to return to customers
more than $6 million following questionable sales of a type of
variable-annuity contract.
Variable annuities are widely used for retirement saving. The
contracts at the heart of the Financial Industry Regulatory
Authority's action are so-called L-shares, a type of mutual fund
shares that are held in variable annuities and are designed for
short-term investors, offering shorter surrender periods in
exchange for higher fees.
But the L-shares in question, Finra said, often carried income
and withdrawal "riders" that provided benefits only if the customer
held on to the L-shares.
"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," Brad Bennett, Finra's chief of enforcement, said in a press
release.
In addition to failing to spot red flags, Finra accused the
firms of other oversight breaches.
The firms consented to the censure without admitting
wrongdoing.
Voya Financial Inc., the former unit of ING Groep, is to pay
$2.75 million, the highest fine, and ordered to pay at least $1.8
million to customers who bought the L-shares. Finra said Voya made
more than $198 million, or roughly 25% of its revenue, from the
sale of individual variable annuities from July 2012 through August
2014.
Cetera Advisor Networks LLC, First Allied Securities Inc.,
Summit Brokerage Services Inc. and VSR Financial Services Inc. were
ordered to pay a combined minimum of $4.5 million, Finra said
Wednesday.
The amounts actually to be paid to customers are yet to be
calculated based on information the firms are to submit to
Finra.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
November 02, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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