Eight Firms Fined $6.2 Million for Variable Annuity L-Share Supervisory Failures

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FINRA fined eight firms a total of $6.2 million for failing to supervise sales of variable annuities (VAs). In addition to fining the firms, which include five broker-dealer subsidiaries of Cetera Financial Group, VOYA Financial Advisors, Kestra Investment Services, and FTB Advisors, FINRA also ordered five of the firms to pay more than $6 million to customers who purchased L-share VAs with incompatible, complex, expensive, or similarly problematic minimum income and withdrawal riders.

Fines imposed by FINRA against the named firms include penalties against:

  • VOYA Financial Advisors, Inc. (Des Moines, Iowa) - $2.75 million fine.
  • Cetera Advisor Networks LLC (El Segundo, California) - $750,000 fine.
  • Cetera Financial Specialists LLC (Schaumburg, Illinois) - $350,000 fine.
  • First Allied Securities, Inc (San Diego, CA) - $950,000 fine.
  • Summit Brokerage Services, Inc (Boca Raton, Florida) - $500,000 fine.
  • VSR Financial Services, Inc (Overland Park, Kansas) - $400,000 fine.
  • Kestra Investment Services, LLC (Austin, Texas) - $475,000 fine.
  • FTB Advisors, Inc (Memphis, Tennessee) - $250,000 fine.

FINRA also ordered the following firms to pay the following amounts to adversely affected investors:

  • > VOYA Financial Advisors - $1.8 million to customers.
  • > Four Cetera Financial Group broker-dealers, including Cetera Advisor Networks, First Allied, Summit Brokerage Services, and VSR Financial Services - $4.5 million to customers, collectively.

The investigation states that the aforementioned firms failed to establish and/or maintain adequate supervisory systems relative to the L-Share VAs, which are complex investment products ordinarily designed for short-term investors willing to pay higher fees in exchange for shorter surrender periods. FINRA wrote that the firms failed to provide guidance to their representatives and principals regarding L-Share VAs and their suitability for clients.

VOYA and the four Cetera group firms that were ordered to pay over $6 million to customers additionally were implicated as failing to identify red flags of unsuitable sales patterns.

Other penalties were also imposed. For instance, FINRA cited First Allied for failing to supervise sales of structured products and non-traditional (complex) exchange-traded funds (ETFs). First Allied and Kestra also allegedly permitted representatives' use of consolidated statements without proper oversight, according to FINRA's report.

If you have invested with VOYA Financial Advisors, the five named Cetera Financial Group broker-dealers, Kestra Investment Services, or FTB Advisors in L-share variable annuities, or in any other complex product such as ETFs sold by firm lacking adequate supervision or which engaged in unsuitable recommendations due to inadequate disclosures or training, and such unsuitable trading activity 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.

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