FINRA Fines Firm for Failing to Supervise Variable Annuity Exchange Activity

A firm settled FINRA charges for failing to maintain an adequate supervisory system for monitoring deferred variable annuity exchanges.

According to the AWC, a firm representative recommended a series of short-term and unsuitable variable annuity exchanges that were not detected by the firm. FINRA found that the firm failed to implement procedures, designate responsibilities, or maintain any system for monitoring exchange rates. As a result, the firm did not identify multiple problematic recommendations. 

FINRA determined that the firm did not implement any meaningful surveillance of deferred variable annuity exchange activity. FINRA noted that although the firm’s written procedures referenced a general requirement to implement surveillance, no actual processes or tools existed to track or review representatives’ exchange rates. FINRA determined that the firm instead relied solely on a manual, transaction-by-transaction review of individual applications, with no oversight designed to detect broader patterns or trends.

FINRA concluded that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2330 ("Members' Responsibilities Regarding Deferred Variable Annuities"), and 3110 ("Supervision"). 

To resolve the matter, the firm consented to a censure and a $20,000 fine.