Washington (Dec. 5, 2002) -- The NASD has censured and fined American Express Financial Advisors Inc. $350,000 for shady sales of variable annuities and variable life insurance products.
The self-regulatory organization for the securities industry found that the firm failed to establish, maintain and enforce adequate supervisory policies and procedures governing the sale of variable annuities and variable life insurance products during a 30-month period ending in 2000. American Express neither admitted nor denied NASD's findings.
NASD said some of the firm's registered representatives omitted material facts when selling variable annuities into qualified plans by failing to disclose that the products don't provide the benefit of tax deferred earnings when purchased in qualified plans. Others failed to determine customer need for a benefit offered by a variable annuity other than tax deferral. Since the sale of variable annuities into tax-deferred accounts are only appropriate when there are other benefits, such as a death benefit or annuity payout options, such sales violate NASD rules because the reps "lacked a reasonable basis for believing that their recommendations were suitable."
In some cases, representatives didn't adequately explain to customers the costs and features of variable annuities and failed to compare and contrast variable annuities with mutual funds in instances where the customer's needs might have been better met through mutual funds.
-- Electronic Accountant Newswire staff
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