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Insurance company on receiving end of huge FINRA fine

"A perfect storm."

Those are the words chosen by the head of the financial regulatory arm that governs the bulk of the American securities industry to describe ineffectual practices and oversight at a leading insurance company regarding variable annuity products offered to consumers.

In noting the investigatory findings of a probe carried out by the Financial Industry Regulatory Authority, FINRA Chairman Richard Ketchum stated that MetLife was remiss in supervising brokers and ensuring that they were properly educated to understand the details and fees associated with new annuity contracts. Ketchum additionally noted that a material internal conflict existed regarding product fees, with many customers exchanging products to their detriment and enriching MetLife in the process.

The result of the regulatory probe: a $25 million fine levied against MetLife, the second largest penalty ever assessed by FINRA against any investment entity in the United States. The only other fine to eclipse that was a $50 million exaction against Credit Suisse First Boston Corp. in 2002 for what FINRA alleged were unlawfully inflated commissions for brokers involved in select initial public offerings.

A Wall Street Journal article discussing the variable annuity debacle and resulting fine notes the popularity of that product for many senior investors who favor its tax advantages and regard it as a relatively conservative investment. Variable annuities are also viewed, though, as being comparatively complex offerings that are not easily understood by many investors.

FINRA's near-record fine underscores the authority's concern with that complexity and its insistence that brokers selling the product be properly trained regarding its essential details and adequately convey all relevant information to prospective customers.

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