The Financial Industry Regulatory Authority (FINRA) has fined VALIC Financial
Advisors, Inc., a Houston-based broker-dealer, $1.75 million. VALIC Financial
Advisors consented to the entirety of FINRA’s findings when settling
the matter, but neither admitted nor denied the charges.
According to FINRA, VALIC failed to identify and address certain conflicts
of interest present in the firm’s compensation policy relating to
the recommendation and sales of certain variable annuities to customers.
FINRA stated that there was limited or no compensation for brokers or
the firm when proceeds were transferred from a VALIC variable annuity,
but the firm’s policy was that compensation was paid when those
proceeds were rolled into the firm’s managed investment program
or its fixed index annuity.
During the period of time when the firm failed to address these conflicts
of interest, FINRA said that there was a large amount of growth in the
sales of these incentivized products. FINRA’s investigation showed
that sales of the proprietary fixed index annuity increased by more than
610 percent in the seven months following its addition to the compensation
policy and they found that a significant volume of assets moves to the
advisory platform from VALIC variable annuities during 2012 and 2013.
FINRA’s Executive Vice President and Chief of Enforcement commented
on the findings:
“The conflict of interest inherent in VFA’s compensation policy
was not identified or monitored. Compensation policies that reward representatives
for moving customers from one complex proprietary product to other potentially
higher cost products must include monitoring and supervision that ensure
that the representatives are not putting their own financial interests
ahead of their obligation to their customer.”
VALIC Financial Advisors also reportedly failed to:
- Enforce procedures related to the review of variable annuities transactions
exceeding customer concentration levels.
- Enforce procedures relating to reviewing required variable annuity disclosure forms.
- Provide the principals who reviewed variable annuity transactions with
enough information regarding the customer’s other assets.
- Maintain systems and procedures needed to properly supervise certain components
of individual variable annuity sales.
If you lost money investing with VALIC Financial Advisors, Inc., our investment
fraud attorneys at Meyer Wilson are ready and waiting to help you recover
your losses. Give us a call at one of our four office locations, or
fill out our online form to get started with a free case evaluation.