Two recent enforcement actions from the Financial Industry Regulatory Authority Inc. demonstrate FINRA’s attention on variable annuities, especially faulty annuity exchanges.
Brokers typically recommend clients replace annuities under Section 1035 of the tax code. That provides a tax-free transfer for the client, but also generates additional commission for the broker. As such, 1035 exchanges are typically how abusive account churning occurs with annuity products.
Clients can incur higher annuity fees and surrender charges due to the exchanges, but they also can have significant tax liabilities because the brokers, in trying to conceal their abuse, don’t categorize the annuity replacements as 1035 exchanges.
FINRA levied $30.3 million in fines among 30 variable annuity cases in 2016, including a $25 million penalty against MetLife Securities Inc. in May for negligent behavior regarding variable annuity replacements.
If you or someone you know lost money in a variable annuity exchange, you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or email@example.com for a free and confidential case evaluation.