FINRA Orders Ameriprise to Pay $1.4M Over Variable Annuity Supervisory Failures

The Financial Industry Regulatory Authority has ordered Ameriprise Financial Services LLC to pay more than $1.4 million related to supervisory failures in its oversight of variable annuity exchange recommendations.

In a letter of acceptance, waiver, and consent, Ameriprise consented to a censure, a $450,000 fine, and restitution of $993,950.47 to 114 affected customers. The Minneapolis-based firm accepted the sanctions without admitting or denying the findings.

“We are pleased to have resolved this matter, which involved a very small number of variable annuity transactions from many years ago,” a company spokesperson told AltsWire. Importantly, the settlement did not identify any transactions as unsuitable for clients. We remain confident in the strength and effectiveness of our current supervisory program.”

According to the AWC, between January 2015 and December 2018, Ameriprise failed to establish and maintain a supervisory system reasonably designed to oversee recommendations involving variable annuity exchanges with guaranteed lifetime withdrawal benefit, or GLWB, riders.

During that period, Ameriprise representatives recommended that customers replace existing annuities with newer contracts featuring a GLWB rider that included an annual growth credit.

According to FINRA, the firm failed to provide sufficient guidance to registered principals to determine whether customers would benefit enough from the 6% growth credit to justify the higher fees associated with the new riders. Recommendations were also made to 114 customers who were already eligible to begin withdrawals or intended to start income streams shortly after the exchange. Because the growth credit only applied before withdrawals commenced, these customers received little to no benefit from the more expensive feature.

On average, the unsuitable exchanges cost each affected customer $8,718.86.

FINRA found that Ameriprise violated FINRA Rule 3110, which requires firms to maintain a reasonable supervisory system and written procedures; FINRA Rule 2330(c) and (d), which requires specific procedures for the review and approval of deferred variable annuity exchanges; and FINRA Rule 2010, which requires firms to observe high standards of commercial honor and equitable principles of trade.

The firm is required to pay restitution to the 114 identified customers, with individual amounts ranging from less than $200 to more than $44,000. Ameriprise has 120 days from the notice of acceptance to submit proof of payment to FINRA.

Ameriprise has been a FINRA member since 1972 and currently operates with nearly 15,000 registered representatives across more than 4,000 branches.

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