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MetLife Fined Total of $25 Million by FINRA for Annuity Switching
MetLife insurance has been fined $20 million by the Financial Industry Regulatory Authority (FINRA), Wall Street’s policing body for misleading customers in switching them from variable annuities contracts into more expensive ones. Today, FINRA said the decision was its largest fine related to variable annuities, popular yet complex investments that have grabbed the attention of regulators in recent years. FINRA has taken hundreds of disciplinary actions against brokers and investment firms for abuses in sales of variable annuities.
FINRA also ordered MetLife Securities Inc. to return $5 million to customers for allegedly making negligent material misrepresentations and omissions on customer applications for switching into new variable annuity contracts. The self-regulatory organization (SRO) said tens of thousands of customers were affected. As his typical in such matters, MetLife neither admitted nor denied the allegations but did cooperate in the investigation according to regulators.
FINRA alleged that from 2009 through 2014, MetLife misrepresented or omitted one important fact related to the costs and guarantees of customers’ current variable annuities contracts in 72 percent of the 35,500 replacement applications MetLife approved. The company told customers that their current contract was more expensive than the recommended replacement, when in fact the current contract was less expensive, according to the regulators.
In addition, MetLife failed to tell customers that the recommended new contract would reduce or eliminate important features of the current contract, including guaranteed income benefits and accrued death benefits. MetLife’s variable annuities replacement business garnered it around $152 million in commissions over the five year period, according to FINRA.
Sales of variable annuities, which are tax-deferred and often used to save for retirement, have ballooned in recent years. They are contracts with investors in which the company selling them agrees to make periodic payments to the investor. The periodic payouts change depending on the performance of the investment linked to the annuities through underlying sub-accounts.
The Obama administration recently acted to require that brokers who recommend investments for retirement savers meet a stricter standard that now applies to registered advisers. The idea is to prevent brokers from steering customers into riskier investments because they pay the broker a high commission than most other traditional investments.
Variable annuities are often the investment that brokers recommend for people’s retirement accounts, especially when they are retiring or leaving and company, and “roll over” their employer-based 401(k) account into an individual retirement account, or IRAs.
If you have been the victim of securities or variable annuity fraud, the stock fraud and FINRA attorneys at Colling Gilbert Wright & Carter can help. With decades of combined experience, our attorneys are here to take your case and fight for your rights, helping ensure you are properly compensated for your damages.