FINRA fined VALIC Financial Advisors, Inc. a total of $1.75 million for filing to detect and address certain conflict of interest situations related to variable annuity (VA) transactions—specifically that brokers were financially rewarded for steering VAs into fee-based platform or fixed index annuities—and for failing to supervise the VA business. The findings indicate that many of the conflict-of-interest VA assets were held in retirement plan accounts, and the sanction also includes misconduct relative to the sale of VAs with multiple class shares, notably L-shares.
According to FINRA, VALIC Financial failed to have in place a reasonable system to address and review conflicts of interest created by the firm's compensation policy: the firm provided registered representatives with a financial incentive to recommended that customers move their funds from a VALIC variable annuity to the firm's fee-based platform or into a fixed index annuity.
As such, investigators found that during the time VALIC offered this incentive, there was a "significant volume of assets moving from VALIC VAs to the advisory platform." In a related finding, FINRA wrote that sales of the proprietary fixed index annuity grew more than 610 percent during the policy period.
In addition to the conflict of interest punishment, FINRA cited VALIC Financial for failing to supervise certain aspects of individual VA sales, including transaction review failures, failing to enforce procedures related to VA transactions that exceeded customer concentration levels, and inadequate procedures related to supervising multi-share class VAs, including L-shares.
If you have invested with VALIC Financial Advisors in variable annuities, or with any firm whose sales of VAs or similar complex products were improperly tied to financial incentives or other broker or financial adviser benefits that posed an inappropriate conflict of interest that 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.
News Release: FINRA Fines VALIC Financial Advisors, Inc. $1.75 Million for Failure to Prevent Conflicts of Interest in its Compensation Policy and for Other Supervisory Failures Related to Variable Annuity Sales (FINRA)