FINRA Fines BBVA Securities for Failing to Monitor Annuity Exchange Rates

The Financial Industry Regulatory Authority has fined BBVA Securities $150,000 for failing to have a system in place to monitor deferred variable annuity exchange rates.

According to FINRA’s order, from at least March 2019 through August 2021, the New York broker-dealer failed to establish and maintain a reasonably designed supervisory system, including written supervisory procedures for the surveillance of rates of deferred VA exchanges.
The firm’s supervisory system did not include a determination of representatives’ rates of VA exchanges as required by FINRA Rule 2330(d).
Accordingly, BBVA violated FINRA Rules 3110, 2330 and 2010, the order states.

“When supervising VA exchanges, the firm relied on transaction-by-transaction approvals from regional supervisors, along with periodic reports of each representative’s exchange activity,” according to FINRA.

The periodic reports “only included information regarding a single month’s exchange transactions and did not include the representative’s rate of exchange,” the order states.

Variable annuities are complex investments containing securities and insurance features that permit investors to choose among a variety of contract features and options, the regulator explained.

“Due in part to the complexity of these products, FINRA requires that firms provide more comprehensive and targeted protection to investors who purchase or exchange variable annuities,” the order said.

“The firm had no report, alert, or other system or review that surveilled for representatives’ VA exchange rates,” and BBVA’s written supervisory procedures “did not provide for the assessment of representatives’ rates of deferred VA exchanges or provide guidance as to what exchange rate or other characteristics would indicate a pattern necessitating further review.”