SEC Hits Ameriprise Unit for Improper Variable Annuity Switching

Variable annuity exchanges, according to the order, “increased during the Relevant Period from $671 million in 2015 and $768 million in 2016, to $1,006 million in 2017 and $1,049 million in 2018. Contemporaneous RDI emails and other internal documents suggest that at least some portion of that increase likely resulted from the use of in-force annuity lists.”

RDI’s compliance department “became aware of the RDI wholesalers’ efforts and use of lists in or around March 2018, conducted an investigation, and as a result of the investigation, wholesalers who were involved in the conduct and/or those who supervised individuals involved in the conduct received letters of reprimand/caution in May 2018,” the order states.

RDI’s remedial efforts to end the practice included “a training program for wholesalers during which its chief compliance officer explained in detail how the creation and use of these types of in-force annuity lists violated the principles of Section 11,” the order states.

After the relevant period, “RDI’s variable annuity exchanges decreased from $1.049 million in 2018 to $838 million in 2019,” the SEC said.

Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, said in a statement that “Congress enacted Section 11 to prohibit the improper ‘switching’ of investors from one investment product to another for the purpose of generating additional selling charges — precisely the conduct our order finds RiverSource to have engaged in. Protecting retail investors from abusive sales practices is a mainstay of our enforcement program, and we remain committed to holding accountable those who engage in such conduct.”

Without admitting or denying the SEC’s findings, RiverSource consented to an order finding that it violated Section 11 of the Investment Company Act and imposing a cease-and-desist order, a censure and a $5 million civil penalty.