The Financial Industry Regulatory Authority is fining eight brokerage firms $6.2M for not supervising the sale of L-share variable annuities to customers. Five of the firms must pay another $6.3M to customers because the variable annuities that they were purchased were potentially not compatible with the latter’s investment goals and accounts.
The firms, and their sanctions, include: Voya Financial Advisors Inc., for $2.75M fine, First Allied Securities, Inc., for $950K fine, VSR Financial Services, for $400K fine, Cetera Financial Specialists LLC, for $350K fine, Cetera Advisors Networks LLC, for $750K fine, Summit Brokerage Services, Inc., for $500K fine, Kestra Investments, for $475K fine, and FTB Advisors, for $250K fine. The firms that have to pay restitution are: Voya, for $1.8M, while first Allied, Cetera Advisors Networks, VSR, and Summit Brokerage Services will collectively pay $4.5M. All the firms are settling, but they are not denying or admitting to any of the alleged claims.
At issue was the sale of the L-share annuities, which are “potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.” L-share annuities are more likely to pay registered representatives and their firms higher compensation than more traditional instruments.
FINRA said that these complex investments are only appropriate for a limited class of customers and that the firms did not give its advisers “reasonable guidance” to determine which customs fit the criteria. The self-regulatory organization’s notice stated that several of the broker-dealers should have detected “red flags” warning that L-share annuities may not have been suitable for the customers but that the firms failed to identify these alerts. FINRA accused Voya, Cetera Financial Specialists, VSR, and Cetera Advisors Networks of not monitoring variable annuity exchange rates at the firms. Meantime, the SRO also accused First Allied of inadequately supervising its sale of non-traditional exchange-traded funds and structured products, and also, along with Kestra, allowing registered representatives to use consolidated statements without the proper oversight.
It is the job of brokerage firms to properly supervise and train their representatives. Also, they should only recommend investments that are suitable for each client’s investment objectives and the degree of risk the investor’s portfolio can handle. Our L-Share Annuities fraud lawyers work with investors that are seeking to recover their losses. Contact our broker-dealer fraud law firm today.