SEC fines company $50 million over misleading account statements

Securities SEC Enforcement Consumer Finance Securities Act Fees

On July 18, the SEC issued a cease and desist order to a life insurance company for allegedly providing materially misleading account statements to roughly 1.4 million variable annuity investors in violation of the antifraud provisions of the Securities Act of 1933. According to the SEC, since at least 2016, the company misled investors into thinking that their quarterly account statements listed all fees paid during the period. An SEC investigation found, however, that the statements listed only administrative, transaction, and plan operating fees that investors infrequently incurred. The SEC noted that these fees were usually negligible, and only a slight fraction of the overall fees paid by an investor. “When considering how to invest their hard-earned money and save for retirement, it is essential that investors not be misled about the fees they are paying,” Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said in the announcement. “This case should serve as an important reminder to investment firms to carefully review their statements to ensure fee information is disclosed properly.” Without admitting or denying the allegations, the company agreed to pay a $50 million civil penalty that will be distributed to affected investors. The company will also cease and desist from committing or causing any future violations and will revise the way it presents fee information in its variable annuity account statements.