For those who participate in the offering/sale of variable annuities and who may be subject to FINRA examinations, I have summarized some of the key points from Mr. Ketchum’s recent speech before the Insured Retirement Institute Government, Legal and Regulatory Conference.

Exam Priorities

  1. Verify customer assets exist and held at secure locations
  2. Risk analysis > examiners ask right questions when enter
  3. Profiles of firm’s business model and underlying risks
  4. Test for compliance with customer protection rules
  5. Examiners understand risks/management; looking for control breakdowns
  6. Point of Sale exams – focus on branches, rather than headquarters
  7. Pilot program – collect data from underwriters and manufacturers via standard request; templates being used: a) 1st round of requests sent April, 2011; and b) 2nd round of requests to VA manufacturers sent July – August 2011


FINRA is requesting broader data collection with increased analysis to spot trends and create risk-base exams.

Recent Exam findings

  1. Failure to document basic customer information
  2. Inadequate policy and procedures
  3. Inadequate supervisory reviews > suitability
  4. Training programs inadequate
  5. Abusive switches and costly surrender charges
  6. Over concentration of annuity products