Home/Misrepresentation and Fraud, SEC, Securities Law Violations, Variable Annuity/FINRA SANCTIONS FIFTH THIRD SECURITIES, INC. OVER VARIABLE ANNUITY EXCHANGES


The Financial Industry Regulatory Authority (“FINRA”) has announced a fine of $4 million and required an additional $2 million in restitutionary damages from Fifth Third Securities, Inc. for its failures to consider and accurately describe the costs and benefits of variable annuity exchanges, and for recommenFINRA Sanctions Fifth Third Securitiesding variable annuity exchanges without a reasonable basis to believe the exchanges were suitable.

According to the FINRA release, Fifth Third’s principals approved approximately 92 percent of the variable annuity exchange applications submitted to them for review, even though such exchanges are complex investments with costs that may outweigh the potential benefits of the transaction. In a random sample of Fifth Third’s variable annuity exchanges from 2013 to 2015, FINRA found that Fifth Third had misstated or omitted at least one material fact related to the costs or benefits of the exchange in approximately 77 percent of the reviewed transactions.

Variable annuities are complex investments that are high-cost vehicles with a handful of narrow benefits which render them suitable for only a select percentage of investors. Because of the high commissions these products generate, however, they are too often marketed to a much broader range of investors who will not benefit from the features of a variable annuity. Annuities’ death benefits and tax advantages, for example, are not beneficial for investors who already have life insurance and a tax-advantaged retirement account, such as an IRA.

Investors are also too-often unaware of the surrender charges associated with annuities, which essentially “lock in” the investor for long periods (as many as 7-12 years in most instances) or force the investor to pay a high cost to sell the annuity. Because of the high costs associated with variable annuities, the underlying investments must perform exceptionally well for the investor just to break even, while still being exposed to market risks.

If you or someone you know has lost money as a result of an annuity investment that was unsuitable for you or was misrepresented to you by your broker/financial advisor, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.

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