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.
- Verify customer assets exist and held at secure locations
- Risk analysis > examiners ask right questions when enter
- Profiles of firm’s business model and underlying risks
- Test for compliance with customer protection rules
- Examiners understand risks/management; looking for control breakdowns
- Point of Sale exams – focus on branches, rather than headquarters
- 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
- Failure to document basic customer information
- Inadequate policy and procedures
- Inadequate supervisory reviews > suitability
- Training programs inadequate
- Abusive switches and costly surrender charges
- Over concentration of annuity products