MetLife Securities to Pay $25M to FINRA Over ‘Negligent’ VA Replacements

The self-regulator found that MSI failed to disclose to customers that the proposed VA replacement would reduce or eliminate important features in their existing VA, such as accrued death benefits, guaranteed income benefits and a guaranteed fixed interest account rider.

MSI also "understated the value of customers' existing death benefits" in disclosures mandated by Regulation 60, disclosure requirements firms must adhere to for investors in New York.

MSI's principals did not consider the relative costs and guarantees of the proposed transactions, FINRA states. "The firm's principals ultimately approved 99.79% of VA replacement applications submitted to them for review, even though nearly three-quarters of those applications contained materially inaccurate information."

FINRA further found that MSI failed to supervise sales of the guaranteed minimum income benefit rider, the firm's bestselling feature for its VAs, that was marketed to customers (many of whom were already holding MetLife annuities) as a means of providing a guaranteed future income stream.

"The GMIB rider is complex and expensive — annual fees during the relevant period ranged from 1% to 1.5% of the VA's notional income base value," FINRA states. "A frequently cited reason for MSI's recommendation of VA replacements was to allow a customer to purchase the GMIB rider on the new VA contract. Nevertheless, MSI failed to provide registered representatives and principals with reasonable guidance or training about the cost and features of the rider."

FINRA also found that since at least 2009, MSI's customers have received misleading quarterly account statements that understate the total charges and fees incurred on certain VA contracts.

"Typically, the quarterly account statements misrepresented that the total fees and charges were $0.00 when, in fact, the customer has paid a substantial amount in fees and charges," FINRA said.