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 variable annuities.
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 current VA
- Concealing the fact that replacing a current VA with the recommended VA would reduce or even eliminate things like death benefits and guaranteed income benefits
- 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.