PNC Investments has agreed to pay a $200,000 fine over violations involving its supervisory procedures pertaining to annuity products, reports Think Advisor.
The Financial Industry Regulatory Authority levied the penalty for PNC’s failure to establish and maintain a reasonably designed supervisory system to monitor its representatives’ rates of deferred variable annuity (VA) exchanges during a period spanning at least June 2021 to the present.
FINRA’s order states that PNC’s supervisory system “did not require the firm to determine if its associated persons had rates of effecting VA exchanges that raised for review whether such rates evidenced conduct inconsistent with FINRA rules or the federal securities laws as required by FINRA Rule 2330(d), and did not provide guidance as to how to make that determination. Nor did the firm’s systems require tracking or further review of representatives with potentially inappropriate rates of exchanges.”
In a letter of acceptance, waiver and consent, the authority said that PNC had violated several rules including FINRA Rule 2330, which requires firms to provide clients with information about the key features, benefits and risks of deferred variable annuities, including any fees, charges and surrender periods.
The firm was also found to be in violation of Rule 3110, which requires firms to have a supervisory system in place to achieve compliance with securities laws and regulations, as well as written procedures to supervise the types of business in which the firm engages to make sure they comply with all rules and regulations.
An investigation by FINRA’s Department of Enforcement pinpointed FINRA’s lack of written supervisory procedures to assess rates of exchanges.
“Instead, when supervising VA exchanges, the firm relied on transaction-by-transaction supervisory approvals, along with a data-visualization dashboard — not addressed by the firm’s WSPs — that regional supervisors could use on an ad-hoc basis to calculate rates of exchange,” the order states.
PNC did not admit or deny the allegations but accepted and consented to FINRA’s findings. Along with the $200,000 fine and a censure, PNC agreed to certify that the firm has remediated the issues that were identified by FINRA and implemented a supervisory system designed to achieve compliance with FINRA Rule 2330.
FINRA noted that variable annuities are complex investments containing securities and insurance features and that due to their complexities, firms are required to provide more comprehensive and targeted protection to investors who purchase or exchange these annuities.
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