Broker-Dealer Relied on Reps to Self-Police Variable Annuity, Mutual Fund and 529 Sales
A large broker-dealer agreed to pay $8.3 Million in fines and restitution for failing to supervise reps in connection with sales of variable annuities, mutual funds, and 529s over the course of several years. FINRA asserts that the respondent’s reps recommended variable annuity switches, mutual fund classes and 529 classes that were not necessarily in the best interest of clients. Instead of implementing a supervision and monitoring system, the respondent relied on reps themselves to ensure compliance. FINRA further asserts that the reps were not provided adequate training or supervision.
You can’t let the inmates run the asylum. Reps have a conflict of interest when selling investment products, so you can’t rely on them to self-police. Firms must implement checks to ensure that sales are suitable and then test broad compliance to raise and remedy any red flags.