A firm settled FINRA charges for failing to supervise its representatives' recommendations regarding variable annuities, mutual funds and 529 plans.
In a Letter of Acceptance, Waiver, and Consent, FINRA found that the firm inadequately supervised:
- the provision of variable annuity disclosure forms, which resulted in the inaccurate disclosure of surrender charges, fees and other features of existing and proposed variable annuities. Firm principals approved variable annuity exchanges based on such inaccurate disclosures, which made the approved exchanges appear more favorable than was the case, resulting in violations of FINRA Rule 2330 ("Members' Responsibilities Regarding Deferred Variable Annuities");
- rates of exchange, as the firm's exception report for analyzing patterns of variable annuity exchanges identified only representatives whose total business consisted of a specific volume of quarterly exchanges, and only if the "total value of those exchanges exceeded 50% of the representatives' overall business." This resulted in exception reports failing to detect inappropriate rates of exchange;
- variable annuity share-class recommendations, including those by representatives who employed a "one-size-fits-all" recommendation approach to variable annuity share classes. As a result, the firm violated NASD Rules 3010(a) and (b) and FINRA Rules 2330, 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade");
- sales charges on mutual fund purchases, specifically with respect to representatives failing to accurately apply sales charge waivers to certain mutual fund purchases. This resulted in representatives selling shares with higher ongoing fees and expenses to customers. As a result of such overcharging, the firm violated NASD Rules 3010(a) and (b) and FINRA Rules 3110(a) and (b), and 2010; and
- the sale of 529 plans, specifically regarding the suitability of 529 plan share-class recommendations. The firm did not provide its supervisors with sufficient guidance required for adequate review of its representatives' 529 plan share-class recommendations. As a result, the firm violated MSRB Rule G-27 ("Supervision").
To settle the charges, the firm agreed to (i) a censure, (ii) a $4.4 million fine and (iii) payment of approximately $4.4 million in restitution.
Primary Sources
- FINRA Press Release: FINRA Sanctions Transamerica Financial Advisors, Inc. $8.8 Million for Supervisory Violations Related to Variable Annuities, Mutual Funds and 529 Plans
- FINRA AWC: Transamerica Financial Advisors, Inc.
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