Transamerica to Pay $8.8 Million to Settle FINRA Charges
The Financial Industry Regulatory Authority has ordered Transamerica Financial Advisors Inc. to pay millions in fines and restitution after it allegedly failed to reasonably supervise its representatives’ recommendations of three different products.
The Financial Industry Regulatory Authority has ordered Transamerica Financial Advisors Inc. to pay a $4.4 million fine, plus nearly $4.4 million in restitution after it allegedly failed to reasonably supervise its representatives’ recommendations of three different products—variable annuities, mutual funds, and 529 plans.
According to a letter of acceptance, waiver, and consent issued by FINRA, Transamerica allegedly failed to reasonably supervise representatives’ variable annuity recommendations. From approximately May 2010 until May 2016, the firm’s commissions from the sale of variable annuities comprised commissions in excess of $591 million, or more than 40 percent of its total revenue.
FINRA alleges that Transamerica’s system for supervising variable annuity sales and exchanges was deficient, resulting in various sales practice violations. Most significantly, according to FINRA, was the firm’s failure to detect that certain reps 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.
FINRA also claims that the broker-dealer failed to supervise the sale of certain mutual funds. The firm 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 assist them in making this determination and failed to verify whether waivers were properly applied. As a result, Transamerica failed to apply approximately $438,200 in available waivers to customers from approximately January 2009 until November 2016.
Third, Transamerica allegedly failed to reasonably supervise representatives’ recommendations to customers to purchase certain share classes of 529 savings plans and did not provide adequate guidance to representatives regarding share-class differences. FINRA also claims that the broker-dealer did not provide supervisors with the information necessary to properly evaluate the suitability of 529 share-class recommendations.
Transamerica, which signed the AWC letter without admitting or denying the findings, has approximately 3,400 registered representatives and more than 350 branch offices. The company does not have any relevant disciplinary history.
