Once upon a time, compliance was a lower case “c” and lived in a small room somewhere in a company’s legal department. All that changed with the discovery in 2003 of market abuses that eventually led regulators to impose whopping fines and, of course, issue more regulations.
While the insurance industry wasn’t hit nearly as hard as the fund industry, the wake-up call was loud and clear: create new monitoring procedures, or suffer the consequences.
One unexpected place where investigators began to unearth a pattern of late trading, market timing, unsuitable trades and questionable business practices was in the broker-initiated transfer of funds within variable annuities. What particularly disturbed them was the lack of a standard mechanism through which reps could request and complete a fund transfer without the full knowledge of their registered broker-dealer which, ultimately, bears the burden of supervisory responsibility.
Download the Congressional Testimony: One Less Compliance Issue - Annuity Fund Transfers