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SWS Charged with Inadequate Supervision of VA Transactions

FINRA charged SWS Financial Services Inc. with multiple failures related to variable annuity (VA) transactions, including supervisory inadequacies, procedural deficiencies and lack of oversight. The allegations state that during the period of SWS' violative conduct, more than 70% of the firm's unsupervised VA business was sent onward, without ever having been reviewed, to insurers such as MassMutual Life Insurance Co. and Jackson National Life Insurance Co.

Investigators concentrated on this unsupervised VA business—or VA sales generated in offices that did not have an onsite supervisor—and found that between September 2009 and May 2011, SWS failed to have supervisory systems and written procedures in place for such activity and failed to develop a training plan to ensure proper review and surveillance protocols were followed with respect to VA transactions conducted at sites without an onsite supervisor.

Instead, FINRA found that applications—the 70% figure, as above—were sent to insurers without proper review by an SWS securities principal, which had been unwritten practice, but not documented procedure.

Investigators reviewed several VA deals that found their way to insurers, deeming that several "fishy VA deals slipped through the cracks." For instance, one representative had recommended to 29 clients that they should swap VAs issued by MassMutual Life Insurance Co. for those issued by Jackson National Life Insurance Co. because Jackson was set to stop issuing certain guaranteed living benefits.

FINRA deemed several of these 29 exchanges as possibly "inappropriate" because the clients were under the age of 45 at the time of transaction, meaning they were not eligible to add benefits offered by Jackson National. As a result, these clients incurred surrender charges and went into the VA contract with higher annual expenses.

The findings state that VA sales made up 16-to-20% of SWS' total revenues during the 2009-2011 review period.

If you have invested with SWS Financial Services Inc. or with any firm, broker or financial advisor whose recommendations of variable annuities or other investment vehicles have been unsuitable, resulted in unnecessary charges and fees or have proven otherwise harmful to your investments and financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.

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