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.