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  • SEC: Bad Annuity Sales Still an Issue; Beefs Up Exam Team

    April 30, 2010 by Daisy Maxey

    WASHINGTON -(Dow Jones)- The Securities and Exchange Commission continues to encounter suitability problems with the sale of retirement products and variable annuities to senior citizens, Carlo di Florio, director of the commission’s Office of Compliance, Inspections and Examinations, said Thursday.

    Di Florio also discussed what the SEC has done to beef up its examinations process, partly so that it can more closely monitor the risk inherent in firms’ products and strategies.

    He made the comments here Thursday at the 2010 Government, Regulatory & Compliance Conference of the Insured Retirement Institute, a trade group of annuity providers.

    The commission continues to encounter situations in which elderly people have been sold annuity products that are not right for them, he said.

    These suitability problems occur at firms that lack defined tools to determine whether a certain product is appropriate for a specific customer, he said. The commission has also seen suitability problems arise due to lack of communication with customers and within firms and a lack of supervision and training of salespeople, di Florio said. In addition, some firms fail to follow-up and take action when suitability issues are identified, he said.

    Di Florio also discussed the “incredible change” the SEC is undergoing, part of which is its efforts to strengthen its examination program and make it more risk-based. The commission is rethinking its role in monitoring risk, and considering how it can adjust its focus to monitor new and emerging risks in firms’ strategies and products, he said.

    The goal is to build commission examination teams that can come into firms and understand their business models, strategies and the risks inherent in those strategies, di Florio said.

    Part of that effort will be encouraging more teamwork across di Florio’s office, across the entire commission as well as working with other regulators, such as the Financial Industry Regulatory Authority and the Federal Reserve, he said.

    The commission will also be very open to dialogues with the industry, di Florio said, noting that it had been criticized for not knowing about certain industry practices.

    In addition, the commission is hiring for its examination team to fill gaps in its expertise, he said. In the past, it may have been knowledgeable in certain areas, such as legal issues, but not as much in areas like trading, structured products or risk management, he said.

    “We are thinking very differently about who are the right people to bring into the exam process,” he said.

    -By Daisy Maxey, Dow Jones Newswires; daisy.maxey@dowjones.com; 212-416-2237

      (END) Dow Jones Newswires
      04-29-101545ET
      Copyright (c) 2010 Dow Jones & Company, Inc.

    Originally Posted at NASDAQ on April 30, 2010 by Daisy Maxey.

    Categories: Industry Articles
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