Ambiguous Disclosure Results in $1.625 Million Fine
The sponsor of a variable annuity product agreed to pay $1.625 Million to settle SEC allegations that the prospectus did not sufficiently describe a guaranteed minimum benefit feature. The SEC charges that the firm had indications that the prospectus disclosure confused investors, product managers, and sales agents by failing to sufficiently describe caps on accruing benefits. The firm ultimately fixed the language and then removed the cap feature after pressure from the SEC. The SEC brought its case under Section 34(b) of the Investment Company Act, which prohibits any misleading statements in fund documents.