In December 2020, FINRA sanctioned Transamerica Financial Advisors, Inc. $8.8 million for supervisory violations related to variable annuities, mutual funds and 529 plans; this includes $4.4 million in restitution to 2,400 customers and a $4.4 million fine.
According to FINRA, the Transamerica Financial Advisors, Inc. failed to supervise its registered representatives’ recommendations of variable annuities, mutual funds, and 529 plans. FINRA found that between May 1, 2010 and May 15, 2016, Transamerica Financial Advisors, Inc. failed to reasonably supervise representatives’ variable annuity recommendations.
“During this period, the firm’s commissions from the sale of variable annuities comprised more than 40 percent of the firm’s total revenue yet TFA’s system for supervising variable annuity sales and exchanges was deficient, resulting in various sales practice violations. Most significantly, the firm failed to detect that certain of its representatives made thousands of misstatements to customers in recommending variable annuity exchanges, understating the benefits of the existing variable annuity, and overstating the benefits of the new variable annuity,” according to FINRA.
FINRA also found that between January 1, 2009, and November 15, 2016, Transamerica Financial Advisors, Inc. failed to reasonably supervise representatives’ sale of certain mutual funds. FINRA found that Transamerica Financial Advisors, Inc. “relied on its representatives to determine the applicability of sales charge waivers to customers’ mutual fund purchases, but the firm failed to provide guidance to representatives to help them make this determination, and failed to establish a system to verify whether waivers were properly applied. As a result, TFA failed to apply approximately $438,239 in available sales charge waivers to customers.”
FINRA found that from May 1, 2010 through May 31, 2015, Transamerica Financial Advisors, Inc. failed to reasonably supervise representatives’ recommendations to customers to purchase particular share classes of 529 savings plans. “Transamerica Financial Advisors, Inc. did not provide adequate guidance to representatives regarding the importance of considering share-class differences when recommending 529 plans and failed to provide supervisors with the information necessary to properly evaluate the suitability of 529 share-class recommendations,” according to FINRA.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Transamerica Financial Advisors, Inc. may be liable for investment or other losses suffered by its customers.
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