Recovering Losses caused by Investment Misconduct

FINRA Statistics Show Surge in Variable Annuity Cases

While overall arbitration filings with the Financial Industry Regulatory Authority (“FINRA”) increased last year, cases involving variable annuity sales increased nearly threefold, rising to 123 cases in 2009 from only 47 in 2008.

A variable annuity is a complex, specific type of annuity product that includes both insurance and securities components.  Due to their intricacies, most clients rely heavily on their brokers in choosing whether a variable annuity is a suitable investment.  And they are often accompanied by a lot of costly features that are unnecessary for most investors. 

Variable annuity sales practices were also the focus of several FINRA disciplinary actions last year, including a $1.75 million fine against Fifth Third Securities, Inc. of Cincinnati, Ohio, for a series of violations related to variable annuity sales and exchanges.

Just a couple years ago, FINRA instituted new suitability rules specific to variable annuities in an effort to stop the proliferation of variable annuity complaints.  But it appears that variable annuities are still being sold to uninformed consumers, many of whom are elderly.

Far too often, brokers recommend their clients purchase a variable annuity due to the high commissions they receive on the sales; they one of the highest commissioned products a broker can sell. Variable annuities are typically unsuitable for most investors, especially elderly ones.