Houston, Texas-based VALIC Financial Advisors, Inc. (VALIC) was hit with a $1.75 million fine by the Financial Industry Regulatory Authority (FINRA) for failing to prevent compensation conflicts. VALIC is alleged to have incentivized its registered representatives to sell its own annuities and discouraged them from selling non-proprietary products.
FINRA found that from October 2011 to October 2014, VALIC failed to maintain a reasonable supervisory system to address the potential conflicts of interest created by its compensation policy, which incentivized its representatives for recommending that customers move funds from VALIC variable annuities to the firm’s fee-based platform or a VALIC fixed index annuity. Further, FINRA found that VALIC made the compensation conflict worse by prohibiting its representatives from receiving compensation when moving customer funds from a VALIC variable annuity to a non-VALIC variable annuity, mutual fund or other non-VALIC product.
FINRA noted that during 2012 and 2013, a seven month period after the compensation policy was amended to include the fixed index annuity, sales of the product grew by more than 610%. FINRA Executive Vice President and Chief of Enforcement, Brad Bennett said, “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.” Without admitting or denying the FINRA findings, VALIC Financial was ordered to pay a $1.75 million fine.
FINRA rules require brokerage firms to establish and implement a reasonable supervisory system to protect customers from the risks associated with investing. The implementation of the rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for investment losses which stem from their employees’ misconduct. Therefore, investors who have suffered losses due to a brokerage firm’s failure to supervise the unsuitable recommendations of its representatives can bring forth claims to recover damages against firms, like VALIC Financial, which have a duty to supervise employees in order to protect their customers’ interests.
Have you suffered losses in your VALIC Financial account due to an unsuitable variable annuity investment? Did your stockbroker make an unsuitable recommendation that doesn’t fit with your investment objectives? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against VALIC Financial stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.