AXA Fined $20 Million for Variable Annuities Improprieties

Posted on March 28th, 2014 at 9:00 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

The New York Department of Financial Services (“NYDFS”) charged a $20 million fine to AXA Equitable Life Insurance Co. for limiting returns to legacy variable annuity clients without proper notice.

In 2009, 2010 and 2011, AXA added a “Tactical Manager Strategy”, which utilizes derivatives to lower volatility during rocky markets, for certain variable annuity contracts. 

Though NYDFS had approved AXA’s strategy at the time, the agency now alleges that the insurer failed to inform and explain to the department the significance of the changes brought about by introducing the Tactical Manager Strategy to existing policyholders.

According to NYDFS, the potential risks of the strategy include: limiting gains that a client would otherwise receive; and loweringthe value of certain guaranteed benefits that are eligible for periodic benefit base resets, so that the client is eligible only for a benefit base reset when his or her account value rises.

The change effectively altered the nature of the product which AXA did not explain to NYDFS. 

On a related note, the SEC has signaled that it is keeping a close eye on product filings and updates to existing variable annuity contracts which could potentially curb investors’ returns or impede their ability to build their benefit base by keeping them from contributing more money to the contract. Further, FINRA has indicated that advisers still are on the hook for continuing suitability determinations with respect to old variable annuity contracts that undergo updates and changes.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

Tags:

Return to Archive

TESTIMONIALS

Previous
Next

I want to thank you for your excellent professional representation. It was greatly appreciated.

Michael M.

LATEST NEWS AND ARTICLES

February 22, 2024
Key Considerations for Advisors When Assessing the Financial Soundness of Annuities

While rating agencies like Fitch and S&P Global Ratings generally highlight the strength of annuity issuers, advisors still should scrutinize certain factors in their assessment process.

February 21, 2024
SEC Alleges Fraud Against Morgan Stanley and Former Executive in Block Trading Business

As reported by the Wall Street Journal, the Securities and Exchange Commission (SEC) has charged Morgan Stanley & Co. LLC and its former head of equity syndicate desk, Pawan Passi, with a multi-year fraud involving the disclosure of confidential information related to block trades.

February 20, 2024
Challenges Persist: Firms Struggle to Comply with Regulation Best Interest

FINRA's annual report for 2024 reveals a concerning trend among broker-dealers, with numerous instances of violations of Regulation Best Interest (Reg BI).