FINRA has fined UnionBanc Investment Services, LLC (“UBIS”) $100,000 over supervisory violations related to variable annuity transactions and exchanges.
Variable annuities are complex products, commonly marketed and sold to retirees or individuals saving for retirement, that permit customers to choose among a variety of contract features and options.
If you have lost money with UnionBanc Investment Services, LLC, contact FINRA arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Letter of Acceptance, Waiver, and Consent (“AWC”)
UBIS and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on May 5, 2021, over findings that 1) UBIS failed to establish and maintain a system and written supervisory procedures reasonably designed to supervise certain types of variable annuity transactions, and 2) UBIS failed to establish and maintain a system and written supervisory procedures reasonably designed to monitor rates of variable annuity exchanges.
The AWC indicates that from at least January 2016 through December 2018, UBIS failed to establish and maintain a reasonably designed supervisory system and written supervisory procedures to achieve compliance with applicable securities laws and regulations with respect to certain types of variable annuity transactions. Specifically, UBIS failed to detect that information was missing with respect to variable annuity exchanges involving living benefit riders and buffer annuities. This prevented UBIS’s reviewing principals from having a reasonable basis for approving these transactions.
Further, from at least January 2016 through September 2019, UBIS failed to establish and maintain a reasonably designed system and written supervisory procedures for the surveillance of rates of variable annuity exchanges. While monthly reports listing individual exchanges were available, they did not contain information necessary to detect rates of exchanges by the firm’s registered representatives. UBIS compliance personnel only used these reports to review the individual suitability of each transaction. Additionally, the firm’s written supervisory procedures failed to specify who was responsible for surveilling for rates of exchanges and failed to provide reviewing principals with any guidance for determining what constituted excessive rates of exchanges.
As a result, UBIS violated FINRA Rules 3110(a) and (b), 2330(c), (d), and 2010.
UBIS is headquartered in Glendale, California, and has been a FINRA member since 1984. The firm is a full-service broker-dealer and employs 406 registered representatives in 239 branch offices.
FINRA Rules 3110, 2330, and 2010
FINRA Rule 3110(a) requires a member firm to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.”
FINRA Rule 3110(b) requires a member firm to “establish, maintain, and enforce written procedures to supervise the types of business in which it engages and the activities of its associated persons that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with the applicable FINRA rules.”
Due in part to the complexity of variable annuities, FINRA Rule 2330 requires that firms provide more comprehensive and targeted protection to investors who purchase or exchange variable annuities. FINRA Rule 2330(c) requires all variable annuity applications to be reviewed and approved by a principal who “shall approve the recommended transaction only if he or she has determined that there is a reasonable basis to believe that the transaction would be suitable based on the factors delineated in paragraph (b) of this Rule.”
FINRA Rule 2330(d) provides that in addition to the general supervisory requirements of FINRA Rule 3110, “a member must establish and maintain specific written supervisory procedures reasonably designed to achieve compliance with the standards set forth in [Rule 2330].” FINRA Rule 2330(d)(1) requires a member firm to “implement surveillance procedures to determine if any of the member’s associated persons have rates of effecting deferred variable annuity exchanges that raise for review whether such rates of exchanges evidence conduct inconsistent with the applicable provisions of this Rule, other applicable FINRA rules, or the federal securities laws (‘inappropriate exchanges’)….”
A violation of Rule 3110 or 2330 also violates FINRA Rule 2010, which requires FINRA members to observe high standards of commercial honor and just and equitable principles of trade.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with UnionBanc Investment Services, LLC, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.