The Securities and Exchange Commission (SEC) ordered AIG Unit VALIC to pay almost $40 million to settle claims of wrongdoing. According to the Commission, VALIC Financial Advisors failed to disclose business practices and investment selections that harmed Florida teachers saving for retirement.
VFA Failed to Notify Clients of Payment to Solicit Business
Based on official records, from October 2006 up until 2019, VALIC failed to inform clients that Variable Annuity Life Insurance Company (the firm's parent company) paid a for-profit organization associated with Florida K-12 teachers' unions to refer business to both companies. For the violation, the SEC levied a civil penalty of $20 million.
The Commission also declared that VALIC failed to disclose to its customers that it collected 12b-1 fees and revenue sharing and evaded transaction fees for mutual fund investments for their retirement plans -- explaining that said investments were more expensive than others available. As a result, authorities ordered disgorgement of $15.4 million and a civil penalty of $4.5 million.
Unfortunately, the retirement investing business is so lucrative that these relatively small fines likely will do little, if anything, to stop abuses from taking place.
SEC Launched Initiative to Protect Teachers from Exact Scam
These actions come a year after the Commission launched an initiative to shield teachers investing for their retirement.
SEC's Chairman Jay Clayton explained that these actions should be a signal to teachers and those who sell them investment products. He also added that educators should ask questions about their investment options to make educated decisions concerning retirement.
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