Transamerica Financial Advisors, Inc. to Pay $8.8 Million FINRA Sanction for Supervisory Violations
On December 21, 2021, the Financial Industry Regulatory Authority (FINRA) announced that Transamerica Financial Advisors, Inc. (TFA) had agreed to pay an $8.8 million sanction which FINRA levied against TFA for failing to supervise its registered representatives in three product areas including variable annuities, mutual funds and 529 plans.1 Half of the sanction, $4.4 million, will go toward restitution for 2,400 affected customers.2 In agreeing to the sanction, TFA neither admitted, nor denied, the charges.
FINRA develops and enforces the rules governing registered brokers and broker-dealer firms in the U.S. and is an independent, nongovernmental agency.
TFA is a fee-based financial advisor firm which manages more than $1.3 billion in assets for over 54,000 individual clients.3 Headquartered in St. Petersburg, Florida, the company has 1,266 financial advisors in 364 branch offices across the country. TFA is part of Transamerica. which is part of the Aegon group of companies, and is a leading provider of life insurance, retirement and investment solutions for millions of customers in the U.S.
FINRA cited TFA for failing to reasonably supervise representatives’ variable annuity recommendations from a six-year period starting May 1, 2010 through May 15, 2016. FINRA alleged that TFA did not have proper supervisory safeguards in place to detect that certain of its registered representatives made misstatements to customers when recommending variable annuity exchanges, helping them understand the benefits of existing variable annuities, and in overstating the benefits of new variable annuities. During the period in question, the firm sold approximately 51,000 variable annuity policies, with over 40 percent of TFA’s revenue coming from the commissions on that $591 million in variable annuity sales.4 One misstatement, which affected more than half of the 3,781 variable annuity (VA) exchanges the company approved, resulted in customers exchanging VAs they were holding with new ones, a move that harmed the customer, but generated commissions for TFA.
The issue FINRA found with TFA’s mutual fund sales was again a failure to reasonably supervise representatives’ sale of certain mutual funds. This occurred during a period from January 1, 2009 to November 15, 2016. FINRA charged that TFA failed to provide guidance to representatives to help them determine the applicability of sales charge waivers to customers’ mutual fund purchases. The firm also did not have an established system to verify whether waivers were properly applied. This resulted in TFA representatives failing to apply approximately $438,239 in available waivers to customers.
With regard to 529 college savings plans, FINRA alleged that TFA failed to reasonably supervise its representatives’ recommendations to customers when purchasing particular share classes during a period from May 1, 2010 through May 31, 2015. TFA didn’t provide guidance to their representatives regarding the importance of considering share-class differences when recommending these 529 plans and also failed to give supervisors information on how to evaluate the suitability of 529 share-class recommendations.5 These supervisory failings resulted in TFA representatives recommending unsuitable 529 share classes because they failed to take into account the age of beneficiaries and the number of years until expected withdrawals.6
In response to the FINRA sanction, a Transamerica spokesperson issued a statement saying, “Since this investigation began in 2015, TFA has enhanced its training, guidance, policies and procedures, and oversight of its registered representatives and has enhanced its disclosures to customers. The settlement impacts a very small number of the total number of customer accounts held by TFA between 2009 and 2016. TFA is confident in its investment recommendations and remains committed to continuously improving its business practices.”7
The SEC and FINRA were established to enforce the regulation of securities firms. The goal of Securities attorneys is to protect investors and collect money damages imposed by fraudulent stockbrokers. If you have questions about securities fraud, investment losses or the management of your investment accounts, contact us today. Our Michigan Securities Law Firm in Detroit is the ideal choice with more than 20+ years’ experience.
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1,5 FINRA Sanctions Transamerica Financial Advisors, Inc. $8.8 Million for Supervisory Violations Related to Variable Annuities, Mutual Funds and 529 Plans by Michelle Ong, 12/21/2020
Link: https://www.finra.org/media-center/newsreleases/2020/finra-sanctions-transamerica-financial-advisors-inc-88-million
2,4,6,7 FINRA hits Transamerica with $8.8 million sanction, InvestmentNews, by Mark Schoeff, Jr, 12/21/2020
Link: https://www.investmentnews.com/finra-hits-transamerica-with-8-8-million-sanction-200653
3 Transamerica Financial Advisors, Inc. Review by Ben Geier, 9/04/2020
Link: https://smartasset.com/financial-advisor/transamerica-financial-advisors-inc-review