How To Recover Losses with Variable Annuity Exchanges

According to a recent InvestmentNews article, the Financial Industry Regulatory Authority (FINRA) is coming down hard on variable annuity (VA) misconduct by brokers and brokerage firms, after a year of fines related to the sales of variable annuities in 2016. The watchdog agency recently suspended broker Cecil E. Nivens for two years and ordered the broker to disgorge nearly $186,000 in commissions for causing “considerable monetary harm” to customers related to VA exchanges, according to a filing on September 18th. FINRA also suspended broker Walter Marino for similar abuses. Marino was suspended for one year. Brokers typically replace annuities under Section 1035 of the tax code, which provides a tax-free transfer for the client, but also additional commissions for the broker. Typically, this can lead to churning in the accounts of annuity products. Churning is excessive trading inside an account, and it is against securities laws and most internal firm policies. FINRA levied $30.3 million in fines among 30 variable annuity cases in 2016, the second-largest fine total behind that for anti-money laundering cases, according to Eversheds Sutherland, a statistics law firm. VA fines increased 191% over their level in 2015, and the number of cases rose 20%. Last year was the first time since 2009 that Vas have made it on the list of FINRA’s top enforcement issues as measured by total fines assessed, also according to Sutherland.

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