FINRA Sanctions Transamerica Financial Advisors, Inc. $8.8 Million for Supervisory Violations Related to Variable Annuities, Mutual Funds and 529 Plans
Firm Ordered to Pay $4.4 Million in Restitution to Approximately 2,400 Affected Customers
WASHINGTON—FINRA announced today that Transamerica Financial Advisors, Inc. (TFA) has agreed to pay approximately $4.4 million in restitution to approximately 2,400 customers for failing to supervise its registered representatives’ recommendations of three different products - variable annuities, mutual funds, and 529 plans. FINRA also fined TFA $4.4 million.
First, FINRA found that from May 1, 2010 through May 15, 2016, TFA failed to reasonably supervise representatives’ variable annuity recommendations. During this period, the firm’s commissions from the sale of variable annuities comprised more than 40 percent of the firm’s total revenue yet TFA’s system for supervising variable annuity sales and exchanges was deficient, resulting in various sales practice violations. Most significantly, the firm failed to detect that certain of its representatives made thousands of misstatements to customers in recommending variable annuity exchanges, understating the benefits of the existing variable annuity, and overstating the benefits of the new variable annuity.
Secondly, from January 1, 2009, through November 15, 2016, TFA failed to reasonably supervise representatives’ sale of certain mutual funds. FINRA found TFA relied on its representatives to determine the applicability of sales charge waivers to customers’ mutual fund purchases, but the firm failed to provide guidance to representatives to help them make this determination, and failed to establish a system to verify whether waivers were properly applied. As a result, TFA failed to apply approximately $438,239 in available sales charge waivers to customers.
Finally, from May 1, 2010 through May 31, 2015, TFA failed to reasonably supervise representatives’ recommendations to customers to purchase particular share classes of 529 savings plans. TFA did not provide adequate guidance to representatives regarding the importance of considering share-class differences when recommending 529 plans and failed to provide supervisors with the information necessary to properly evaluate the suitability of 529 share-class recommendations.
Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said, “It is imperative that FINRA member firms selling variable annuities, mutual funds, and 529 plans exercise particular care and diligence in training and supervising those representatives who recommend them to customers. FINRA will continue to fulfill its mission of investor protection by making sure harmed customers receive restitution.”
This matter originated from a FINRA cycle examination of TFA.
In settling this matter, Transamerica Financial Advisors, Inc. neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.