Finra whacks mid-sized NJ broker-dealer with $325,000 fine over variable annuity sales

Summit Equities sold 1,037 individual variable annuity contracts to its customers during the time period cited by Finra

May 2, 2017 @ 12:32 pm

By Bruce Kelly

The Financial Industry Regulatory Authority Inc. on Monday said it had fined a New Jersey broker-dealer, Summit Equities Inc., $325,000 for failing to supervise brokers' sales of multi-share class variable annuities to clients.

From October 2011 to December 2015, Summit Equities failed to reasonably supervise advisers' recommendations of the variable annuities; the firm also failed to provide training to its registered representatives and principals on the sale and supervision of multi-share class variable annuities, according to the Finra settlement. The company also failed to reasonably supervise the private securities transactions of one undisclosed registered rep from 2001 to 2012, according to Finra.

Summit Equities CEO Steven Weinman did not return phone calls Tuesday morning for comment.

The firm maintains its headquarters in Parsippany, N.J. and employs approximately 132 registered persons, according to Finra.

During the period cited by Finra, Summit Equities sold 1,037 individual variable annuity contracts to its customers, according to Finra. About 45% of those contracts were L-share contracts.

L-share contracts typically provide a shorter surrender period than B-shares, and the fees assessed for L-shares are typically 35 to 50 basis points higher annually than most B-share contracts, according to Finra.

"Despite the significant roles that VA sales played in Summit Equities' overall business, the firm failed to implement a supervisory system and procedures designed to reasonably ensure the suitability of its multi-share class VA sales, including its sale of L-share contracts," according to Finra.

Sales of L-share variable annuities appear to be on the decline. Indeed, the specter of the Department of Labor's fiduciary rule for retirement accounts is hastening the demise of L-share variable annuities. Insurance companies last year quickened the pace of shuttering such variable annuity products as demand dried up.

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