$6.2 Million Fine for Supervisory Failures Related to Variable Annuity L-Shares

Eight Firms Are Fined A Total of $6.2 Million by The Financial Industry Regulatory Authority (FINRA) for Failure to Supervise Sales Related To Variable Annuity L-Shares.

 

This action involved L-share Variable Annuities that are complex investment products which combined insurance and security features designed for short-term investors.  The investors would be willing to pay higher fees in exchange for shorter surrender periods.  The L-shares had potential to pay greater compensation to the firms and registered representatives than more traditional share classes.  The firms lacked adequate systems to supervise variable annuities with multiple share classes.  They also failed to provide reasonable guidance to its registered representatives regarding the narrow class of customers that the annuities were suitable for because of the costs and features.

Sanctions were imposed by FINRA against the following firms:

  • VOYA Financial Advisors Inc., Des Moines, IA  ($2.75 Million)
  • Cetera Advisor Networks LLC, El Segundo, CA ($750,000)
  • Cetera Financial Specialists LLC, Schaumburg, IL ($350,000)
  • FTB Advisors, Inc., Memphis, TN ($250,000)
  • Kestra Investment Services, LLC, Austin, TX ($475,000)
  • First Allied Securities, Inc., San Diego, CA ($950,000)
  • Summit Brokerage Services, Inc., Boca Raton, FL ($500,000)
  • VSR Financial Services, Inc., Overland Park, KS ($400,000)

Five of the firms were also ordered by FINRA to pay more than $6 million to customers who purchased L-share variable annuities that had potential complex, incompatible and expensive long-term minimum-income and withdrawal riders.

Voya was ordered to pay at least $1.8 million to customers.

Cetera Advisors Networks, First Allied, Summit Brokerage Services and VSR were ordered to pay customers at least $4.5 million collectively.

The firms neither admitted nor denied the charges and consented to the entry of FINRA’s findings.

Read more here about the sanctions.

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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.