Large Insurance Company Fined $8 Million for Delaying Order Processing
A large insurance company that sponsors variable annuities and underlying mutual funds agreed to pay an $8 Million fine for failing to timely process orders. The SEC alleges that over a 16-year period the respondent specifically ordered the post office and private couriers to delay delivery of mail until after 4:00 PM so that investors would receive the following day’s NAV. The Investment Company Act requires that investors receive the NAV as calculated at the close of business on the day the order is received. The SEC does not allege any specific benefit to the respondent or harm to investors.
OUR TAKE: Why would the respondent delay mail delivery? One possibility is that the delay allowed the firm’s operations an additional 24 hours to process the orders. How does this happen over the course of 16 years? “That’s how we’ve always done it.” This is yet another case where an independent review could have avoided a costly regulatory action.