MetLife to Pay $25 Million Finra Penalty Over Variable Annuities
May 03 2016 - 10:53AM
Dow Jones News
By Aruna Viswanatha
MetLife Inc. agreed to pay $25 million for allegedly misleading
customers about retirement-income products, regulators said
Tuesday, in one of the largest such settlements to date.
The insurer's MetLife Securities Inc. unit "made negligent
misrepresentations and omissions to customers" when replacing their
variable annuities between 2009 and 2014, making them seem better
for the customers than they actual were, the Financial Industry
Regulatory Authority said.
MetLife neither admitted nor denied the Wall Street watchdog's
findings, according to the settlement. In a statement, MetLife said
it "fully cooperated with the FINRA investigation."
Variable annuities are products popular with older, risk-averse
investors that offer tax advantages to invest in stock and bond
funds. For an added fee at many insurers, investors can receive
lifetime payments of a guaranteed-minimum amount even if the
underlying funds perform poorly.
The regulator said the settlement, which includes a $20 million
fine and $5 million to reimburse customers, is the second largest
fine it has ever levied. The largest, a $50 million penalty against
Credit Suisse First Boston Corp. over allegedly inflated
commissions for hot initial public offerings, came in 2002.
According to the Tuesday settlement, MetLife sometimes
overstated the cost of a customer's existing variable annuity
contract, which in some instances increased a customer's cost by 2%
annually. The firm also sometimes failed to tell customers a
proposed replacement would reduce or eliminate features of their
existing variable annuity, Finra said.
"Variable annuities are complex and expensive products that are
routinely pitched to vulnerable investors as a key component of
their retirement planning," Finra enforcement chief Brad Bennett
said. "Firms engaging in this business must ensure that the
information on the costs and benefits of these products provided to
customers is accurate."
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com
(END) Dow Jones Newswires
May 03, 2016 10:38 ET (14:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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