FINRA Sanctions Firm For Conflicts

Conflicts of interest are at the center of many of the Commission’s recent enforcement action. Typically those conflicts are not disclosed. Indeed, the SEC has brought a series actions against private equity firms and investment advisers centered on conflicts.

FINRA’s most recent action is also built on conflicts. The regulator found that VALIC Financial Advisors, Inc. created a conflict for its registered representatives by the way it compensated them for certain transactions. Specifically, over a three year period beginning October 2011 the firm provided a financial incentive to its registered representatives to recommend that customers move their funds from LALIC variable annuities to the firm’s fee-based platform or to its fixed income annuity. The inherent conflict of this compensation scheme was bolstered by prohibiting compensation when customers moved from the firm product to non firm VAs, mutual funds or other such products.

VALIC Financial also failed to maintain the proper supervisory procedures with regard to certain aspects of sales of individual VAs. The firm also failed to furnish its principals with adequate information to review the transactions and to enforce its rules regarding the review of required VA disclosure forms. The firm was fined $1.75 million.

Program: On December 1, 2016 Dorsey will present it Third Annual Federal Enforcement Forum featuring panels discussing enforcement issues relating to the SEC, CFTC, FERC, EPA and CFPB. The program is live in Washington, DC. and video cast. No charge for registration (here).