According to a recent online article by Financial Planning, the Financial Industry Regulatory Authority (FINRA) will be looking in to large volume sales of L-shares and variable annuities. An L-share is a type of variable annuity that typically charges higher ongoing fees in exchange for a shorter-than-normal period of time before clients can withdraw their premium payments or exchange their contracts without paying a surrender charge. They also typically come with bigger commissions and payouts for brokers and their firms. Many of these L-shares and variable annuities are not suitable for investors. FINRA’s David Klafter states that the problem with L-shares and variable annuities comes when clients have not been informed about holding periods and fees, and have discussions about them been documented. FINRA is concerned about “instances where firms have a lack of procedures in that particular area, and they also have problematic transactions going on.” FINRA will be focusing mainly on those firms that have a high concentration of variable annuity sales.
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