Finra fines CFD Investments $125,000 over variable annuities supervision

Kokomo, Ind., firm also censured for failing to establish and enforce procedures

Jan 11, 2019 @ 2:45 pm

By InvestmentNews

The Financial Industry Regulatory Authority Inc. has censured CFD Investments of Kokomo, Ind., and fined it $125,000 for failure to establish and enforce adequate supervisory procedures in connection with the sale of variable annuities by its registered representatives.

CFD, which was established in 1990, has 190 brokers and approximately 140 branch offices throughout the United States.

Finra said that between July 2014 and July 2016, "CFD failed to establish, maintain and enforce a supervisory system and written procedures reasonably designed to supervise representatives' recommendations of variable annuities."

(More:Finra fines H. Beck $400,000 for unsuitable sale of variable annuities)

During that time period, Finra said, the sale of variable annuities accounted for about 41% of the firm's total revenue, with 1,574 variable annuity purchases and exchanges. Finra said that more than 18% of the variable annuity transactions were L-share contracts, a significant number of which were sold with long-term riders. Many of the customers purchasing L-shares indicated they had a long-term investment horizon, which meant they likely would have been better served had they purchased B-share contracts, which don't impose annual fees of between 35 and 50 basis points for the liquidity offered in L-shares.

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