FINRA Fines Firm for Variable Annuity Supervisory Failures

A firm settled FINRA charges for failing to adequately surveil and supervise deferred variable annuity exchanges.

According to the AWC, during the relevant period, the firm lacked any report, alert, or other system to detect inappropriate exchanges or implement corrective measures. FINRA found that as a result of these failures, "the firm failed to detect 22 inappropriate exchanges by a former representative[, which] caused 14 customers to incur $129,938.79 in unnecessary surrender fees." As a result, FINRA found that the firm failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to surveil its representatives' rates of deferred variable annuity exchanges. 

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

The firm consented to a censure, a $150,000 fine, and restitution of $129,938.79 plus interest to the affected customers.