Finra “is continuing its crackdown on variable annuity misbehavior this year, following a blistering year of fines associated with VA sales in 2016,” composes InvestmentNews.
The body has come down hard on malfunctioning annuity exchanges, the publication notes. This year, it suspended broker Cecil Nivens for 2 years and brought him to disgorge practically $186,000 in commissions. A September Finra filing states the broker was accountable for “significant financial damage” to customers including variable annuity exchanges. A Finra filing from early this month keeps in mind that broker Walter Marino got a 1-year suspension over comparable concerns.
Brokers might have an incorrect reward to switch out customers’ VAs. Tax-free transfers are done under Section 1035 of the tax code, but consultants can also use them to churn up brand-new commissions.
The exchanges by Marino and Nivens cost customers greater annuity charges and give up charges, but also caused big tax costs. It ends up that the brokers, attempting to fly listed below the radar, cannot categorize the annuity replacements as 1035 exchanges, according to Finra.
Finra’s VA fines leaped by 191% in 2015, to $30.3 million throughout 30 cases, Investment News notes. MetLife Securities was walloped with a record $25-million charge for irresponsible habits including VA replacements.