FINRA fined MetLife Securities, Inc. an industry-record $20 million and ordered an additional $5 million payable to customers it says were harmed by the firm's negligent material misrepresentations and omissions on variable annuity (VA) replacement applications. The action covers a six-year period of misconduct, from 2009 through 2014, that allegedly harmed scores of MetLife customers, including many retirees and people saving for retirement who were commonly marketed and sold the complex investments.
According to the investigation, MetLife negligently misrepresented and omitted information relating to costs and guarantees concerning the replacement of one deferred VA for another, and failed to supervise VA replacements and Guaranteed Minimum Income Benefit rider sales. The firm also purportedly failed to disclose forfeited guarantees and misrepresented the annuities' guaranteed death benefit value.
The report states that each misrepresentation and omission made the replacement VA appear more beneficial to the customer, even through the replacements were typically more expensive than the existing variable annuities. FINRA indicated that the Annuity Replacement and Transfer Disclosure portions of the documents, which contained a side-by-side hypothetical illustration of both the existing and replacement VAs and their respective performances over time, relative to death benefit, surrender values, fixed interest, and fees, were inaccurate.
In return for 35,500 VA replacement sales totaling over $3 billion, the investigation continues, MetLife generated $152 million in gross dealer commissions, all while purportedly failing to implement an adequate supervisory structure or system to ensure the accuracy concerning the recommended VA replacements, including lack of adequate training or guidance and improper approval of replacement applications that contained at least one misrepresentation or omission of material fact, such as the aforementioned Disclosure Statement inaccuracies.
FINRA also charged MetLife with producing misleading quarterly account statements that understated the total charges and fees on various VA contracts, including several misrepresentations of total fees and charges being "$0.00" when in fact the customer paid "a substantial amount" in fees and other charges.
The $20 million fine + $5 million order is a FINRA record for variable annuity violations.
If you have invested with MetLife Securities or with a broker or financial adviser in replacement variable annuities or another security whose marketing or sales were conducted through misrepresentations, omissions of material fact or other inaccurate and improper transactions or tactics, and such misconduct and negligence has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.