FINRA’S 2013 Regulatory and Examination Priorities Include Variable Annuity Sales Practice Issues

In its January 11, 2013 Regulatory and Examination Priorities Letter (2013 Letter), the Financial Industry Regulatory Authority (FINRA) includes variable annuity sales practice issues as among the "key investor protection and market integrity issues" that it will focus on in the coming year.

In discussing variable annuities in the 2013 Letter, FINRA recognizes the benefits that they can provide investors, but notes the following concerns:

• long holding periods in conjunction with significant surrender charges can make variable annuities unsuitable for investors who have near-term liquidity needs;
• high fees and expenses above typical subaccount fees reduce performance, and high commissions make variable annuities a target for switching;