The U.S. Financial Industry Regulatory Authority (FINRA) has fined Houston-based brokerage firm VALIC Financial Advisors Inc. (VFA) US$1.75 million for failing to identify and address certain conflicts of interest that were part of its compensation policy, causing brokers to favour its proprietary products.
Specifically, VFA provided its registered reps a financial incentive to recommend customers move their funds from its variable annuities to the firm’s fee-based platform or into a proprietary fixed index annuity. VFA also prohibited reps from receiving compensation when moving clients from its own products to third-party products.
The firm settled the case, neither admitting nor denying the charges, but consenting to the entry of FINRA’s findings.
“Compensation policies that reward representatives for moving customers from one complex proprietary product to other potentially higher cost products must include monitoring and supervision that ensure that the representatives are not putting their own financial interests ahead of their obligation to their customer,” says Brad Bennett, executive vice president and chief of enforcement at FINRA, in a statement.