Variable Annuity Compliance Alert: FINRA Action Highlights Key Gaps
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FINRA's recent enforcement action against BBVA Securities Inc. revealed critical gaps in variable annuity exchange compliance. The firm received a $150,000 fine for supervisory failures between March 2019 and August 2021.
The enforcement action identified failures in four core compliance areas under FINRA Rules 3110, 2330(d), and 2010:
Exchange Rate Monitoring
"The periodic reports only included information regarding a single month's exchange transactions and did not include the representative's rate of exchange," according to the Letter of Acceptance, Waiver and Consent (AWC).
Written Procedures
BBVA's procedures failed to provide guidance on exchange rate assessment or patterns requiring review.
Documentation Standards
The firm's transaction-by-transaction approach missed cumulative exchange patterns that required regulatory oversight.
Surveillance Systems
BBVA "had no report, alert, or other system or review that surveilled for representatives' VA exchange rates."
Key Takeaways for CCOs if any of these are lacking in your program:
*Implement automated exchange rate monitoring systems
*Establish clear procedures for pattern identification
*Document all VA transactions comprehensively
*Deploy systematic surveillance tools
"Variable annuities are complex investments containing securities and insurance features," the AWC notes, requiring enhanced investor protections.
[Note: This article is intended for informational purposes only and does not constitute legal advice. Companies should consult with their legal counsel regarding specific compliance requirements.]
