FINRA fined Fifth Third Securities $4 million and ordered $2 million in restitution for suitability and related failures pertaining to the firm's variable annuity (VA) business.
According to FINRA's report, Fifth Securities representatives made unsuitable recommendations relating to VA exchanges, failed to appropriately consider the costs and benefits of VA exchanges, and failed to disclose certain fees related to these transactions.
Investigators found that Fifth Securities additionally failed to adequately train representatives and principals on certain VA-related matters, including analysis factors involved in decision making as it pertains to whether an investor should keep or exchange his/her existing VA and/or purchase riders.
For example, FINRA found that some Fifth Securities representatives failed to inform investors considering a VA exchange that such an exchange would add fees and/or surrender charges to their overall costs, such that the exchange might not be profitable as it first appeared.
Fifth Third purportedly overstated fees associated with existing VAs or misstated rider fees, failed to disclose benefits and other financial considerations pertaining to existing VAs—such as benefits that would be forfeited if a broker and customer were to effect a VA exchange—and misrepresented that a proposed VA had a living benefit rider when that VA had no such rider.
Investigators determined that in approving 92% of VA exchange applications submitted, Fifth Third did not have a reasonable basis to recommend and approve "many of these transactions" due to the firm's supervisory deficiencies.
FINRA also reviewed Fifth Third's disciplinary history, finding that the firm failed to comply with a 2009 settlement in which FINRA found that Fifth Third had effected 250 unsuitable VA exchanges and transactions from 2004-06, concluding that the firm had inadequate systems and procedures for its VA exchange business during that period.
Similarly, FINRA's present action found that Fifth Third failed to timely and fully implement an independent consultation's recommendations regarding its VA supervision procedures to monitor representatives' recommendation and use of the VA exchange program, and, as FINRA wrote in 2009, the firm's supervisory systems and procedures pertaining to its VA exchange business were inadequate.
If you have invested with Fifth Third Securities or with any broker or financial adviser who has recommended you exchange an existing Variable Annuities product without fully disclosing the costs and benefits (including fees, surrender charges, and/or benefit forfeits), or who has misrepresented, misstated, or omitted important risk or fee information, thus making this recommendation an unsuitable one that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.