Fifth Third Securities Fined $4 Million for Exchanges of Variable Annuities

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On May 8, 2018, the Financial Industry Regulatory Authority (FINRA) announced that it fined Fifth Third Securities, Inc. $4 million.  FINRA, the self-regulator of securities brokerages, levied the fine in connection with its investigation of Fifth Third’s variable annuities exchanges occurring from 2013 through 2015.

FINRA also ordered Fifth Third to pay a total amount of restitution to its customers, which will offer some relief.  However, this will likely not account for significant investor losses in the variable annuities transactions.

Marquardt Law Office LLC is interested in speaking with investors who purchased, sold, or exchanged variable annuities with Fifth Third and its financial advisors or other representatives.  You may be able to pursue a claim on a contingency fee basis to recover your losses.

Fifth Third’s Alleged Violations

FINRA investigated Fifth Third’s marketing and sales of variable annuities to its customers that were exchanged for variable annuities that the customers already owned.  FINRA alleged it found that Fifth Third:

  • “made negligent misstatements and omissions of material fact to customers about the costs and benefits of” the variable annuities exchanges,
  • “failed to have a reasonable basis to recommend and approve those exchanges for the majority” of transactions FINRA reviewed, and
  • “failed to reasonably supervise” the exchanges.

FINRA said Fifth Third representatives misstated and omitted material information in approximately 77% of the annuities exchange transactions FINRA randomly selected for review.  A Fifth Third representative would make an “exchange appear more beneficial to the customer” then it was, alleged FINRA.  For instance, representatives allegedly understated fees, omitted values forfeited in old annuities, and falsely stated proposed annuities had living benefit riders.

FINRA further alleged Fifth Third violated FINRA Rule 2330 that requires brokers and their supervisors to be knowledgeable of variable annuities involved in exchanges, to compare them, and to have a reasonable basis to determine if exchanges are suitable for customers.  FINRA found the brokers and supervisors must have violated this rule since information about the annuities in forms used to evaluate them were misstated or omitted.

Fifth Third also violated Rule 2330 by failing to reasonably supervise the variable annuities exchanges, alleged FINRA.  FINRA found Fifth Third failed to implement training, procedures to monitor exchange rates, and written procedures regarding variable annuities.

This is not Fifth Third’s first variable annuities sanction.  In 2009, FINRA fined Fifth Third $1.75 million for alleged significant deficiencies in its variable annuities business and ordered it to correct its deficiencies.  In the recent review, FINRA found Fifth Third failed to comply with the required corrective measures.

Restitution Will Provide Customers Some Relief

In addition to the $4 million fine paid to FINRA, FINRA ordered Fifth Third to pay $2 million in total restitution to its customers who exchanged variable annuities from 2013 through 2015.  During that time, Fifth Third reportedly sold at least $165.7 million of variable annuities through exchanges generating $8.9 million in commissions.

The restitution will provide investors some relief.  However, many will likely have significant losses not accounted for, including for all variable annuities exchanges occurring before 2013 and after 2015.  Investors have additional options to recover their losses.

Investors’ Options to Recover Losses

Investors have the right to pursue claims in FINRA arbitration to recover their losses caused by brokers and brokerage firms, like Fifth Third, due to fraud, neglect, or negligence.  Securities arbitration is highly complex and should be handled by a securities attorney.

FINRA arbitration has a six-year eligibility period beginning on the last date of occurrences giving rise to a claim.  Determining the six-year period can be a complex issue, but what is important is that investors consult an attorney about potential claims as soon as possible to preserve their rights.

Variable annuities are complex products that often have large hidden costs, such as early termination fees.

If you may have suffered losses or excessive costs from variable annuities while investing with Fifth Third or any of its financial advisors or representatives, contact Marquardt Law Office LLC to speak with a securities attorney and receive a free case evaluation.  You may be able to recover.

Marquardt Law Office LLC is a securities law firm in Chicago, IL representing clients nationwide on a contingency fee basis who have suffered losses from misconduct such as fraud or negligence.


You may read more about the following common types of claims pursued through FINRA arbitration at marquardtlawoffice.com:

Adam J. Marquardt

Adam Marquardt represents investors in securities litigation claims such as unsuitable investments, negligence, and fraud. He is dedicated to recovering financial losses for investors, primarily through FINRA arbitration. Adam’s background includes experience as a FINRA regulator, an accountant and auditor, and an attorney who recovered $8 million litigating cases involving fraudulent financial practices. Adam previously passed the Certified Public Accountant (CPA) exam and is an attorney licensed in Illinois.

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