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Compliance November 4, 2019
AIG Confirms Investigation of 403(b) Annuity Sales Practices
It has been reported that the SEC is investigating sales and disclosure practices at VALIC, a unit of AIG, including its dealings with retirement plan participants at school districts and universities.
Reported by Rebecca Moore
In its Third Quarter 2019 Form 10-Q filing with the Securities and Exchange Commission (SEC), American International Group, Inc. (AIG) says it is currently responding to governmental investigations and examinations pertaining to certain sales and compensation practices and payments and related disclosures in connection with financial planning services and the sale and distribution of related products, including 403(b) and similar retirement plans, by its Individual and Group Retirement business segments.
Last week, the Wall Street Journal reported that the SEC is investigating sales and disclosure practices at VALIC, a unit of AIG, including the company’s dealings with retirement plan participants at school districts and universities, according to people briefed on the matter. The probe is focused on whether VALIC rewarded representatives for selling pricier products and whether representatives properly disclosed commissions, according to the unnamed sources.
According to PLANSPONSOR’s 403(b) Buyer’s Guide, VALIC is ranked No. 4 in 403(b) providers by total plan assets, and it is ranked No. 2 by number of K-12 plans.
The Wall Street Journal reported October 2 that the New York Department of Financial Services sent letters to a dozen major insurers requesting information about their 403(b) annuities sales practices. It is looking into whether agents are engaging in deceptive and unfair sales practices, such as failing to appropriately disclose product costs and merits.
Soon after, it was reported that the SEC is investigating certain practices in 403(b) and 457 plans. According to Jenner & Block attorneys, the SEC “sent letters to companies that administer Section 403(b) and 457 retirement plans, opening an investigation to determine whether violations of federal securities laws have occurred in the plans’ administration. The SEC is seeking details on how the plan administrators, which often serve crucial roles in selecting investments for the retirement plans of employees including teachers and government workers, choose investment options and police themselves when conflicts of interest arise.”
AIG says it has cooperated, and will continue to cooperate, in producing documents and other information with respect to the investigations and examinations of its practices.