FINRA's Focus on Variable Annuity Switches Continues | Faeg

FINRA's Focus on Variable Annuity Switches Continues | Faegre Drinker Biddle & Reath LLP


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On January 8, 2021, without admitting or denying the findings, VALIC Financial Advisors, Inc., (VALIC) entered into a settlement with FINRA Enforcement, through an Acceptance, Waiver and Consent (AWC) where the factual allegation was that between January 1, 2017, and October 31, 2018, the broker-dealer failed to “establish a reasonably designed system and written supervisory procedures for the surveillance of rates of [Variable Annuities] exchanges and for corrective action in the case of inappropriate exchanges, in violation of FINRA Rules 2330(d), 3110, and 2010.” VALIC agreed to a censure and a $350,000 fine.
VALIC was acting as a retailer of mutual fund shares, variable life insurance, annuities, and corporate debt securities. It also acted as a municipal securities broker and provided investment advisory services. As evidence of FINRA’s tenacity in reviewing variable annuities activities, this was the second AWC in just over two years between FINRA and VALIC relating to variable annuities activity. In the first, on November 28, 2018, VALIC had accepted a censure, a $1,750,000 fine, and the entry of findings that (i) from October 2011 through December 2014, VFA failed to establish, maintain and enforce a system reasonably designed to supervise the sale of variable annuity contracts, and (ii) from October 2011 through December 2014, VFA failed to establish, maintain and enforce a system reasonably designed to comply with FINRA Rule 4530.

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