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Yet Another Firm is Fined Over Annuity Sales

By Alex Padalka November 27, 2018

Another investment management company is on the hook over alleged failures in supervising the sale of variable annuities by its representatives, according to self-regulator Finra.

From January 2013 through August this year, H. Beck allegedly failed to maintain a supervisory system and maintain and enforce written supervisory procedures while selling different share classes of variable annuities, including B-share and L-share contracts, according to a letter of acceptance, waiver and consent published by Finra.

L-share contracts, which generally come with surrender periods of three to four years, typically cost investors up to 50 basis points higher in annual fees than B-share contracts, which typically have seven-year surrender periods, the regulator says.

Therefore, L-share contracts aren’t always suitable for investors with long-term time horizons — particularly when the contract is combined with a long-term rider, as the rider requires the holder to hold the annuity longer than the surrender period to deliver the full benefit, according to Finra.

The regulator says H. Beck, which has around 681 registered representatives working out of around 406 branch offices, allegedly sold “many” L-share contracts with long-term riders, often to investors with long-term investment horizons.

From January 2013 through December 2014 alone, 2,835 of the 7,001 variable annuities the company allegedly sold were L-share contracts, according to Finra. L-share contracts were also behind $13.3 million of the $34.9 million H. Beck allegedly made in revenue from the variable annuities during this period, the regulator says.

Finra also found that the company failed to enforce its written supervisory procedures regarding consolidated reports from March 2016 through April 2017, according to the letter of consent.


H. Beck consented to a censure and a $400,000 fine without admitting or denying Finra’s findings, the regulator says.

Finra has zeroed in on alleged violations in sales of variable annuities in recent years. In July, the regulator fined four Advisor Group broker-dealers and four broker-dealers on the National Planning Holdings network a total of $2.7 million for alleged failures supervising the sales of the product.