According to FINRA’s Letter of Acceptance, Waiver, and Consent (“AWC”), No. 2014040870001, MetLife Securities, L.LC. consented to a public censure and to pay a $20 million fine plus an additional $5 million to reimburse customers, relating to FINRA’s allegations that MetLife misled customers about characteristics of variable annuities. This is believed to be the second-largest fine ever imposed by FINRA.
FINRA generally alleged that MetLife failed to provide customers with accurate information necessary to compare the pros and cons of existing variable annuities with proposed replacement variable annuities. Sales of variable annuities generally pay large upfront commissions to brokers of between 5% and 7%. FINRA specifically alleged:
From 2009 through 2014 (the “Relevant Period”), MSI [MetLife Securities] made negligent misrepresentations and omissions to customers about the costs and guarantees relating to the replacement of one deferred variable annuity (“VA”) for another (“VA Replacements”), and failed to supervise VA Replacements and sales of the Guaranteed Minimum Income Benefit (“GMIB”) rider. MSI’s disclosure issues affected almost three quarters of the tens of thousands of VA Replacements. Each misrepresentation and omission about the cost or guarantees associated with the existing VA made the replacement appear more beneficial to the customer, even though the replacement VAs were typically more expensive than the existing VAs.
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During the Relevant Period, MSI sold at least $3 billion in Vas through 35,500 VA Replacements generating $152 million in gross dealer commission for the Firm. Nevertheless, MSI failed to implement an adequate supervisory structure to ensure that its registered representatives obtained and assessed accurate information concerning the recommended VA Replacements. Registered representatives were not provided adequate training or guidance on how to conduct a comparative analysis of material features of the existing and proposed Vas.
As of January 31, 2016, MetLife Securities had 7,238 registered personnel and 923 branch offices.
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