METLIFE to Pay Record FINRA Fine Due to Annuity Practices

FINRA (Financial Industry Regulatory Authority) is Wall Street’s industry-funded watchdog. FINRA engages in a range of activities including oversight and enforcement activities, drafting rules and guidance, and providing education and training. The organization also provides an investor compliance center where consumer complaints about fraud and unfair practices can be leveled and a whistle-blower tip line. FINRA also provides for a means to resolve disputes with consumers through its arbitration and mediation programs. However, currently in focus is FINRA’s regulatory enforcement efforts after the organization reached a record settlement with Metlife involving alleged misconduct regarding certain annuities practices and transactions.

For financial organizations and financial advisors, understanding FINRA’s dispute resolution and regulatory enforcement authority is essential. Organizations that fail to understand regulatory limits may face substantial penalties and fines. Individuals advisors who fail to understand regulatory limits can face significant professional consequences.

Baltimore business attorney William S. Heyman has more than 20 years of experience handling financial industry issues and legal concerns.  Mr. Heyman has a long history of advising broker/dealers, RIAs, and advisors in general compliance matters as well as cases involving gross misconduct involving violations of suitability rules and other improper practices. To schedule a confidential consultation at the Law Firm of William S. Heyman call (410) 305-9287 today.

Metlife Faced Allegations of Unfair Practices and Misrepresentations Regarding Annuities Practices

From 2009 to 2014, Metlife focused on its annuity switching business. During this period, Metlife generated approximately $152 million in annuity switch commissions. Annuity switching typically occurs at the urging of a financial advisor who persuades a client to trade an older annuity product for a different or newer one. While the switch can have benefits for the client, it is often made at a significant short-term cost to the client and benefit to the broker. While a consumer is free to make this decision, it should be based on accurate information and representations by the advisor.

In this case, customers alleged that Metlife engaged in unfair practices and failed to make important disclosures about the existing and new annuities. Allegations against the company included that Metlife brokers falsely told clients that their existing annuity was more expensive than the replacement annuities offered by the company. Furthermore, brokers allegedly failed to disclose that customers who switched would forfeit certain features of their current plan. In one case, a customer forfeited the ability to invest in an account that would provide a guaranteed rate of return. Finally, allegations against the company also included charges that the company failed to “reasonably supervise” switches during the five-year period.

Company and Brokers Face Consequences for the Allegations

This matter originated from a March 2014 FINRA complaint that alleged that two former company brokers engaged in a seven-year scheme to inflate their commissions. The two brokers, Christopher Birli and Patrick Chapin, advised State University of New York employees and allegedly engaged in the tactics described above when handling these client accounts. These brokers were terminated in 2012 and both agreed to be barred from working in the industry. As part of the deal, neither broker admitted fault.

Now, Metlife as an organization is also facing the consequences of alleged practices of this type as described in the settlement agreement with FINRA.  The settlement includes a record fine that is the largest imposed by FINRA over practices related to variable annuities. The fine is made up of two parts. The first is a $20 million fine to be paid to FINRA. The second part of the fine is a $5 million fine that will be distributed to affected customers. The company did not admit guilt as part of the settlement agreement. For its part, a company spokesperson stated, “MetLife fully cooperated with the FINRA investigation and we are pleased to put this matter behind us.”

Facing FINRA Enforcement or Arbitration? Let a Skilled Baltimore Business Lawyer Work for You

William S. Heyman has more than 20 years of experience providing careful guidance to financial professionals and representation for FINRA arbitrations, mediations, and other proceedings. Mr. Heyman can also represent financial services clients who believe that they have been misled or taken advantage of by a financial advisor. To schedule a confidential legal consultation at the Law Offices of William S. Heyman call (410) 305-9287 or contact us online.