Broker-Dealer Settles SEC Charges for Improper Switching of Variable Annuities
"Protecting retail investors from abusive sales practices is a mainstay of our enforcement program, and we remain committed to holding accountable those who engage in such conduct."
Sanjay Wadhwa, Deputy Director of the SEC Division of Enforcement
"Protecting retail investors from abusive sales practices is a mainstay of our enforcement program, and we remain committed to holding accountable those who engage in such conduct."
Sanjay Wadhwa, Deputy Director of the SEC Division of Enforcement
A Minnesota-based broker-dealer settled SEC charges for improperly switching variable annuities in violation of Section 11 ("Offers to exchange securities") of the Investment Company Act.
The SEC found that between 2016 and 2018, the broker-dealer developed and implemented a sales practice to sell variable annuities through an affiliated broker-dealer investment adviser that increased sales commissions through "switching," an improper practice in which existing annuity contracts are replaced with new ones. The SEC stated that this case was the first-ever enforcement action based on Section 11.
To settle the charges, the broker-dealer agreed to (i) cease-and-desist from further violations of Section 11 and (ii) pay a $5 million civil penalty.