The Financial Industry Regulatory Authority is fining VALIC Financial Advisors (VFA) $1.75 million for not properly addressing some conflicts of interest in its compensation policy and failing to adequately supervise its variable-annuities business, including the sale of VAs with multiple share classes.
From October 2011 through October 2014, VFA "created a conflict of interest" by giving registered representatives "a financial incentive to recommend that customers move their funds from VALIC variable annuities to the firm's fee-based platform" or into a VALIC fixed indexed annuity, according to the regulator.
At the time, VFA also said reps would not be compensated when they moved client funds from a VALIC VA to non-VALIC VAs, mutual funds and other non-VALIC products. In 2012 and 2013, FINRA found a "significant volume of assets moving from VALIC VAs to the advisory platform."
During the seven months after VALIC's compensation policy was amended to include a proprietary fixed indexed annuity, sales of the product grew over 600%, according to FINRA. VALIC, which is part of AIG and is based in Houston, has over 1,300 advisors. (VALIC stands for Variable Annuity Life Insurance Company.)
"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," explained FINRA enforcement chief Brad Bennett, in a statement Monday.
