VALIC Fined $1.75M by FINRA

Investors might be surprised to know that it is not illegal, or even unethical, for investment firms to offer financial incentives to their registered agents for moving customer funds from one product to another.  Offering financial incentives can been determined legal, provided the necessary monitoring and supervision is in place to ensure that the representatives are not putting their own financial interests ahead of their obligation to their customer.

A recent FINRA News Release found that Houston-based VALIC Financial Advisors, Inc. (VFA) failed to maintain these systems and procedures and has been fined accordingly. FINRA found that from October 2011 through October 2014, VFA created a conflict of interest by providing registered representatives financial incentives to recommend that customers move their funds from VALIC variable annuities to the firm’s fee-based platform or into a VALIC fixed index annuity. In addition, during 2012 and 2013, sales of their proprietary fixed index annuity grew more than 610% over a seven-month period after the compensation policy was amended to include the annuity. VFA further incentivized the conflict by prohibiting its registered representatives from receiving compensation when moving customer funds from a VALIC VA to non-VALIC VAs, mutual funds or other non-VALIC products.

FINRA fined VFA $1.75 million, finding that they failed to identify and reasonably address certain conflicts of interest in their compensation policy. The firm also failed to adequately supervise its VA business, including the sale of VAs with multiple share classes.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Compensation policies that reward representatives for moving customers from one complex proprietary product to other potentially higher cost products must include monitoring and supervision that ensure that the representatives are not putting their own financial interests ahead of their obligation to their customer.”

Read the entire FINRA News Release here.

The information above was obtained via FINRA’s website. It is for informational purposes only and is not legal advice. It is provided only as general information which may or may not reflect the most recent developments. Check FINRA’s website for the most current information.


Financial Industry Regulatory Authority, Inc. (FINRA) is an independent, non-governmental regulator who oversees the people and firms that sell stocks, bonds, mutual funds and other securities to the public in the United States. They are authorized by Congress to protect investors. They do this by making sure the securities industry operates fairly and honestly with the public.