|Tuesday, May 27, 2003
Nancy A. Condon 202-728-8379
Michael Shokouhi 202-728-8304
NASD Takes Disciplinary Actions For Variable Annuity Abuses And Issues Investor Alert On Variable Products
Washington, DC — NASD announced today as part of its ongoing efforts to curb abuses in the sale of variable products, that it has censured and fined InterSecurities, Inc. of St. Petersburg, Florida, $125,000 for having inadequate procedures and systems governing its sale of variable products and its handling of customer complaints. In addition, in three separate enforcement actions, not related to the InterSecurities matter, NASD announced that it filed complaints against individuals for unsuitable sales of deferred variable annuities.
"There has been a dramatic increase in sales of variable products in the last several years and the marketing efforts used by some variable annuity sellers deserve scrutiny - especially when seniors are the targeted investors," said Mary L. Schapiro, NASD Vice Chairman and President of Regulatory Policy and Oversight. "Sales pitches that confuse or frighten investors violate NASD rules and will be the subject of enforcement action." For this reason, NASD today issued an Investor Alert to help investors better understand variable annuities before purchasing one.
InterSecurities was charged with failing to adequately address customer complaints that were made against it. As an affiliate company of InterSecurities, Western Reserve Life Assurance Co. of Ohio (WRL) received nearly all customer complaints concerning InterSecurities' sales of variable products. Because WRL determined whether each was a "complaint," InterSecurities failed to have records of all complaints and report them to NASD as required by NASD rules.
InterSecurities also did not have procedures in place to ensure the proper registration, training or supervision of individuals that handled customer complaints, adequate guidelines for customer complaint investigations or adequate reviews of its complaint handling process. In addition, over the course of more than four years, InterSecurities had inadequate procedures and systems governing the sale of variable products. In settling these matters, InterSecurities neither admitted nor denied NASD's findings.
In other enforcement actions announced today, NASD filed three separate complaints against individuals for unsuitable sales of variable annuities. They include:
Under NASD rules, individuals and firms named in complaints can file a response and request a hearing before an NASD disciplinary panel. Possible sanctions include a fine, suspension, bar, or expulsion from NASD.
These cases are the latest in a series of special examinations conducted by NASD that focused on the sale of variable contracts.
NASD has issued alerts to both firms and investors to help ensure that these products are properly sold which can be found at:
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD's Web Site at www.nasdr.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business -- from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.