Ohio National Financial Services Inc. and its affiliates have been sued by an independent broker-dealer, Veritas Independent Partners, over the insurer's recent termination of trail commissions on some variable annuities.
In September, Ohio National notified brokerage firms that it would be terminating its selling agreements and ceasing the payment of trail compensation to brokers who sold variable annuities with a guaranteed minimum income benefit rider.
Advisers and insurance executives said the move, which affects most brokerage firms and is to take effect in mid-December, is unprecedented.
Veritas is suing Ohio National on behalf of the hundreds, if not thousands, of broker-dealers that it says are affected by Ohio National's allegedly "unlawful" decision to renege on trails that are contractually owed.
The firm, which has roughly 20 advisers, according to InvestmentNews data, is petitioning the court to maintain the "status quo" — in other words, force the insurer to keep paying the trail commissions.
"It is unjust and inequitable to permit Ohio National to benefit from the deliberate disregard of Ohio National's contractual and legal obligations," according to the lawsuit, filed Thursday in the U.S. District Court for the Southern District of Ohio.
The class-action lawsuit, Veritas v. The Ohio National Life Insurance Co. et al, was filed days after a broker with LPL Financial filed a similar lawsuit alleging Ohio National is engaging in unlawful conduct. The broker, Lance Browning, claimed he stands to lose $89,000 per year in trail commissions.