FINRA Fines Firms For Supervisory Deficiencies Relating To Variable Annuity, Mutual Funds and Unit Investment Trusts

The Financial Industry Regulatory Authority (FINRA) announced today that it fined five bank broker-dealers a total of $1.65 million for deficient supervision and procedures related to variable annuity (VA), mutual fund or unit investment trust (UIT) transactions.

Brokers at each of the firms operated out of branches of affiliated banks, selling VAs, mutual funds or UITs to bank customers, who, in many instances, were elderly. The brokerage customers were referred by bank personnel, and sales of these financial products represented a significant portion of each firm's business.

"Today's actions underscore the need for firms operating bank branches to have effective systems and procedures in place to monitor sales of variable annuities, mutual funds, and UITs," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement. "Bank broker-dealers have access to a broad customer base through their retail bank branches. Proper care must be taken to appropriately supervise sales to those customers, particularly the elderly who can be unfamiliar with securities products as they seek alternatives to certificates of deposit and other bank offerings."

The five firms that FINRA fined for deficient systems and procedures relating to VA, mutual fund or UIT sales, and the amount of their fines, are:

• McDonald Investments (now KeyBanc Capital Markets, Inc.) - $425,000
• IFMG Securities - $450,000
• Wells Fargo Investments, LLC - $275,000
• PNC Investments - $250,000
• WM Financial Services, Inc. (now Chase Investment Services Corp.) - $250,000

McDonald Investments, now KeyBanc Capital Markets, also was charged with unsuitable variable annuity sales to elderly customers.

Source: FINRA press release