Five state insurance regulators have entered into a $2.1 million settlement with Nationwide Life Insurance Co. and Nationwide Life and Annuity Insurance Co. over charges of allegedly unsuitable sales of variable annuities to clients of a Kansas financial advisory firm.
The settlement by regulators in Minnesota, Kansas, California, Missouri and Wisconsin settles charges that Nationwide did not take required steps to adequately supervise some annuity sales by Waddell & Reed Inc., Shawnee Mission, Kan.
According to a statement from the Minnesota Department of Commerce, Waddell & Reed asked Nationwide in 2000 to develop 2 variable annuity products specifically for Waddell & Reed's clients. At the firm's recommendation, a number of W&R clients purchased the new annuities to replace variable annuities they already held.
W&R advisors purportedly advised exchanges without having reasonable grounds for believing that the recommendations were suitable for their customers, according to the department's statement. As a result, customers surrendered 6,742 annuities worth about $616 million. Of the customers that made an exchange, 4,937 incurred surrender charges totaling more than $9.6 million., the department stated.
