MetLife Fined $20M for Annuities Switches

(CN) — MetLife was fined $20 million on Tuesday for misleading customers in switching them from variable annuities contracts into more expensive ones.

According to the Financial Industry Regulatory Authority, the fine is the largest ever levied in a case involving variable annuities.

Increasingly popular in recent years, a variable annuity is a tax-deferred retirement vehicle that allows one to choose from a selection of investments, and then pays a level of income in retirement that is determined by the performance of the investments chosen.

Replacing one variable annuity with another involves a comparison of the complex features of each security, the policing body said.

Accordingly, variable annuity replacements are subject to regulatory requirements to ensure a firm and its registered representatives compare costs and guarantees that are complete and accurate. For investors in New York, a firm also must adhere to very specific disclosure requirements.

The authority said that between 2009 and 2014, MetLife misrepresented or omitted at least one material fact relating to the costs and guarantees of customers' existing variable annuity contracts in 72 percent of the 35,500 variable annuity replacement applications the firm approved, based on a sample of randomly selected transactions.

It also said MetLife represented to customers that their existing variable annuity was more expensive than the recommended variable annuity, when in fact, the existing VA variable annuity was less expensive;

The authority went on to say variable annuity failed to disclose to customers that the proposed variable annuity replacement would reduce or eliminate important features in their existing variable annuity, such as accrued death benefits, guaranteed income benefits, and a guaranteed fixed interest account rider.

MetLife Securities Inc. was also ordered to return $5 million to customers for making negligent material misrepresentations and omissions on applications for switching into new variable annuities contracts.

MetLife neither admitted nor denied the allegations.

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