NEW YORK Nov 28 The Financial Industry
Regulatory Authority fined Houston-based VALIC Financial
Advisors for failing to adequately supervise brokers during a
time when the firm paid them more to put clients in certain
The announcement comes as FINRA conducts a review of sales
practices and incentives at its 4,000 member firms to try to
root out policies that encourage brokers to put profits ahead of
The investigation into VALIC Financial is not connected to
the broader inquiry, a source familiar with the matter said. A
spokeswoman for VALIC said the firm has changed its compensation
policy since FINRA's review.
FINRA said VALIC Financial's compensation structure between
2011 and 2014 created multiple conflicts of interest for the
firm's 1,350 financial advisers, which the firm failed to review
and reasonably address.
Advisers were paid more if their clients moved their money
from VALIC variable annuities into VALIC fee-based advisory
accounts or VALIC's fixed-index annuity.
In contrast, advisers were not paid on accounts if they
advised a client to move money from a VALIC product into a
non-VALIC annuity, mutual fund or retirement plan.
As a result, the regulator found a "significant volume" of
assets were moved onto the firm's advisory platform in 2012 and
2013, and the fixed-index annuity business grew 610 percent.
"Compensation policies that reward (brokers) for moving
customers from one complex proprietary product to other
potentially higher cost products must include monitoring and
supervision that ensure that the representatives are not putting
their own financial interests ahead of their obligation to their
customer," said FINRA's Chief of Enforcement Brad Bennett.
In agreeing to pay the $1.75 million fine, VALIC neither
admitted nor denied the charges.
"We take our regulatory compliance obligations very
seriously and remain focused on providing our clients with the
best service possible," said spokeswoman Linda Malamut.
VALIC Financial Advisors is a subsidiary of The Variable
Annuity Life Insurance Company.
(Reporting by Elizabeth Dilts; Editing by Alan Crosby)