The Financial Industry Regulatory Authority said that MetLife Securities Inc. (MSI) would pay a $20M fine as well as $5M to customers for negligent and material misrepresentations that it purportedly made related to variable annuity replacement applications. According to the self-regulatory organization, these alleged omissions and misrepresentations were on tens of thousands of applications, and they made each replacement variable annuity seem of greater benefit to the customer despite the fact that the variable annuities that were recommended were usually more costly than the ones that the customers already owned. MetLife Securities made at least $152M in gross dealer commissions over six years through its variable annuity replacement business.<\/p>\n
Based on a sample of transactions that were randomly examined, FINRA said that from \u201909 through \u201914, MetLife Securities omitted or misrepresented at least one material fact connected to the guarantees and costs of existing variable annuity contracts in 72% of the 35,500 replacement applications that it approved. Among the alleged misrepresentations:<\/p>\n
\u00b7 Existing variable were costing customers more than the variable annuities they were recommending, when the opposite was true.<\/p>\n
\u00b7 Customers were not told that the variable annuity replacements promised to them would lessen or get rid of key features that their current variable annuity possessed.<\/p>\n
\u00b7 In disclosures, the value of customers\u2019 existing death benefits was understated.<\/p>\n