Securities Arbitration Lawyer Blog
VALIC Financial Advisors, Inc. (“VFA”) and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on January 8, 2021, over supervisory and reporting violations. Specifically, FINRA found that:
- Between January 1, 2017, and October 31, 2018, VFA failed to establish a supervisory system and written procedures for the surveillance variable annuity rates exchanges and for corrective action in case of inappropriate exchanges.
- During this period, VFA also failed to establish a supervisory system and procedures for the review of transactions where a registered representative recommended that a customer invest additional funds into existing variable annuities.
- Between June 26, 2017, and March 20, 2018, VFA failed to timely report information for 174 written customer complaints received by the firm.
VFA’s headquarters are located in Houston, Texas. The firm has been a FINRA member firm since June 1997. It has around 182 branch offices and 1,700 registered individuals. VFA is a subsidiary of The Variable Annuity Life Insurance Company, which is a unit of American International Group (AIG). VFA is engaged in several businesses, including acting as a retailer of mutual fund shares, annuities, variable life insurance, and corporate debt securities, acting as a municipal securities broker. It also provides investment advisory services.
Iorio Altamirano LLP is investigating claims on behalf of VFA customers after the firm was censured and fined $350,000 by FINRA for, among other things, supervisory failures related to its variable annuity recommendations to customers. If you have lost money with VFA or were advised by a VFA representative to invest in a variable annuity, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Prior Disciplinary History
FINRA previously fined VFA $1.75 million for variable annuity sales violations on November 28, 2016.
More recently, in July 2020, the U.S. Securities and Exchange Commission (SEC) charged VFA in a pair of actions for failing to disclose practices that generated millions of dollars in fees for VFA.
The first SEC action concerned VFA’s failure to disclose a material relationship. Specifically, the SEC found that VFA failed to disclose that its parent company paid a for-profit entity, which was owned by Florida K-12 teachers’ unions, to promote VFA and its parent company’s services to teachers. The second action involved the SEC’s findings that VFA failed to disclose conflicts of interest about its receipt of millions of dollars from advisory client mutual fund investments that were typically more expensive for clients than other mutual fund investment options available to them.
VFA agreed to pay approximately $40 million to settle these charges.
What is a Variable Annuity?
A variable annuity is a contract between an investor and an insurance company, through which the insurance company makes periodic payments to the investor or a beneficiary designated by the investor. A variable annuity serves as an investment account that may grow on a tax-deferred basis, includes insurance features, and offers the investor periodic income payments. Variable annuities allow customers to choose from a complex array of contract features and investment options, including various share classes and optional riders. Each variable annuity is unique. The investor pays extra for the features offered by variable annuities.
Variable annuities can help investors meet their retirement or other long-term goals. However, variable annuities are not suitable for all investors, especially for investors with short-term needs or objectives. Variable annuities are complex and can be costly due to fees or taxes and surrender charges that may apply if money is withdrawn early. Variable annuities also involve investment risks and include contract fees. Accordingly, financial advisors must exercise particular care to ensure that the purchase or exchange of variable annuity is suitable for a customer before recommending the product to a customer.
FINRA Rule 2111 requires that all investment recommendations be in the best interest of the customer. FINRA Rule 2330 provides investors with additional protections related to annuities. The rule requires that when a financial advisor recommends an exchange of a variable annuity, the financial advisor must consider whether the customer would incur a surrender charge, be subject to a new surrender period, lose existing benefits (such as death, living, or other contractual benefits), or be subject to increased fees or charges (such as mortality and expense fees, investment advisor fees, or charges for riders and similar product enhancements).
If you have lost money with VFA, contact New York securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.