SERVING CLIENTS NATIONWIDE

Park Avenue Securities Fined $300,000 in Variable Annuities Supervision Investigation

FINRA censured and fined Park Avenue Securities $300,000 for failing to adequately supervise variable annuity (VA) exchanges, including VA contracts and multi-share class VAs, finding that the violations from 2013 through 2015 occurred as the firm sold 12,732 total variable annuity contracts, approximately 20% (2,585) of which were L-share contracts. The findings state that as part of the supervisory violations, Park Avenue Securities failed to ensure that its representatives' sales were suitable for the firm's customers.

AWC #2015043390301

Investigators referred to the difference between B-share and L-share contracts for variable annuities, writing that insurance companies often design L-shares with shorter surrender periods in mind. In exchange for increased liquidity provided by the short surrender periods, L-shares are often associated with higher fees that are typically up to 50 annual basis points higher than most B-share contacts.

The higher annual fee persists for the life of the L-share contact, whether or not the investor chooses to surrender it.

FINRA's investigation found that Park Avenue Securities failed to implement adequate written supervisory procedures and systems designed to supervise representatives' multi-share class VA recommendations, failing to address suitability considerations for determining which share classes to offer its various clients. FINRA wrote that Park Avenue particularly failed to guide or train representatives regarding the combination of L-share contracts with long-term income riders.

The report states that as a result of these failures, and combined with a purported surveillance procedural deficiency, Park Avenue was unable to determine whether the VA share classes sold to its customers were suitable, the firm failed to adequately train its representatives and principals regarding such the suitability of such recommendations, and was unable to determine if representatives had potentially inappropriate rates of VA exchanges.

By comparison, FINRA found that after Park Avenue stepped up its VA trainings in mid-2015, firm representatives sold fewer L-share contacts during the year's second half, and that the firm ceased selling L-share contracts entirely as of December 31, 2016.

If you have invested in variable annuity L-share contracts with Park Avenue Securities, or with any firm or broker who failed to address suitability considerations, and this has resulted in harm due to payment of excessive fees or other damages, including detrimental VA exchanges, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

Categories