The Financial Industry Regulatory Authority (FINRA) recently announced
that it would be sanctioning MetLife Securities $25 million for various
misrepresentations and omissions involving variable annuity replacements.
MetLife Securities will have to pay $25 million in sanctions after FINRA found that the brokerage made negligent misrepresentations
and omissions regarding variable annuity replacements. The fine is for
$20 million while FINRA has ordered the remaining $5 million to go to
MetLife customers. This is the largest fine FINRA has ever imposed over
FINRA says that MetLife's misrepresentations and omissions “made
the replacement [variable annuities] appear more beneficial to the customer”
than their existing variable annuities. In fact, FINRA says, in many cases
the replacements were actually more expensive.
Variable annuity replacements were a cornerstone of MetLife's business,
generating approximately $152 million in commissions over the course of
six years (between 2009 and 2014).
FINRA's probe into MetLife's variable annuity replacement business
during this time revealed that 72 percent of variable annuity replacement
applications the firm approved involved contracts that contained at least
one misrepresentation or omission of material fact.
Some of the misrepresentations and omissions included:
- Statements that the recommended VA was less expensive than the customer's
- Concealing the fact that replacing a current VA with the recommended VA
would reduce or even eliminate things like death benefits and guaranteed
- Understating the value of the customer's current VA death benefits
In addition to these misrepresentations and omissions, FINRA said that
MetLife also failed to ensure that its registered representatives were
properly trained and informed on the VA replacement products. Although
MetLife brokers approved just shy of 100% of VA replacement applications,
nearly 75% of those applications contained inaccuracies.
Variable annuities are often pitched as an integral component of retirement
planning, but they are incredibly complex and costly. Consumers should
make sure they conduct extensive research on these products before investing,
especially when it comes to investing large portions of retirement.