An Ameriprise Financial Services subsidiary agreed to pay a $5 million penalty to settle SEC charges that the firm encouraged Ameriprise brokers to offer variable annuity replacements that harmed customers, the agency announced Wednesday.
The Securities and Exchange Commission alleged that between January 2017 and May 2018, wholesalers from RiverSource Distributors Inc., an Ameriprise affiliate, developed a sales practice that identified annuity holders with contracts that were in force and potentially could be the target of an exchange for a replacement annuity, according to the SEC order.
The RDI staff encouraged Ameriprise registered representatives to offer retail customers the chance to swap their current variable annuity for a more expensive one. The transactions would increase sales commissions for RDI staff and boost variable annuity revenue for RDI, which is the principal underwriter of annuities issued by RiverSource Life.
“RDI wholesalers did so amidst downward pressures in its variable annuity business, and variable annuity exchanges increased during the relevant period,” the SEC order states.
Variable annuity exchanges increased from $671 million in 2015 and $768 million in 2016, to more than $1 billion in 2017 and 2018, respectively, according to the SEC order.
The agency said RDI violated a provision of the Investment Company Act that prohibits principal underwriters from making an offer to exchange securities of registered unit investment trusts, including variable annuities, unless the terms of the offer are approved by the SEC.
“Congress enacted Section 11 to prohibit the improper ‘switching’ of investors from one investment product to another for the purpose of generating additional selling charges — precisely the conduct our order finds RiverSource to have engaged in,” Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, said in a statement. “Protecting retail investors from abusive sales practices is a mainstay of our enforcement program, and we remain committed to holding accountable those who engage in such conduct.”
The SEC said the case is the first it's brought under Section 11. But regulators have been scrutinizing faulty variable annuity exchanges for years.
After a spike in inappropriate variable annuity sales practices between 2016 and 2018, RDI addressed the abuses, according to the SEC order. The firm did not admit nor deny the SEC findings.
“RiverSource Distributors is pleased to resolve this matter,” Ameriprise spokesperson Kathleen McClung wrote in an email. “We identified and promptly addressed it several years ago, including through enhanced training and updated policies and procedures.”
Following RDI’s remedial efforts, variable annuity exchanges decreased from $1 billion in 2018 to $838 million in 2019, the SEC order states.
By listening for what truly matters and where clients want to make a difference, advisors can avoid politics and help build more personal strategies.
JPMorgan and RBC have also welcomed ex-UBS advisors in Texas, while Steward Partners and SpirePoint make new additions in the Sun Belt.
Counsel representing Lisa Cook argued the president's pattern of publicly blasting the Fed calls the foundation for her firing into question.
The two firms violated the Advisers Act and Reg BI by making misleading statements and failing to disclose conflicts to retail and retirement plan investors, according to the regulator.
Elsewhere, two breakaway teams from Morgan Stanley and Merrill unite to form a $2 billion RIA, while a Texas-based independent merges with a Bay Area advisory practice.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
