The Variable Annuity Life Insurance Company (VALIC), a unit of AIG, recently agreed to pay a $20 million settlement related to an action brought by the Securities and Exchange Commission. The SEC action related to VALIC making improper payments to a for-profit entity owned by Florida teachers’ unions in exchange for the unions’ endorsement of VALIC’s financial services. VALIC was in turn pushing improper investment products on investors without full disclosure of its arrangement with the union. The settlement was part of a larger $40 million settlement related to a broader investigation into other VALIC misconduct.
Silver Law Group represents investors who have lost money due to stockbroker misconduct relating to variable annuities. The SEC settlement helps victims recover some money, but other investors may have suffered additional damages by unsuitable investments, improper recommendations to purchase variable annuities in tax free accounts and other misconduct.
VALIC is a SEC-registered investment adviser and broker-dealer that specializes in retirement plans for schools, colleges, and not-for-profit organizations. In 2019, VALIC rebranded as “AIG Retirement Services”. VALIC or AIG promotes its services to Florida teachers and others around the country as offering opportunities to save for retirement. However, they have been accused of selling high commission products to retail investors that are rarely in the client’s best interest. In many circumstances, investors would have earned more for their retirement in other investments or products.
SEC Findings: VALIC Failed To Disclose To Teachers That It Paid Union-Owned Entity For Referrals
In the SEC action related to VALIC’s improper procurement of an endorsement from Florida teachers’ unions, the SEC’s findings included:
- VALIC paid a teachers’ union-owned entity $10,000 monthly for its exclusive endorsement of VALIC as the preferred financial services partner. This arrangement existed for more than a decade.
- The agreement between VALIC and the teachers’ union entity never required VALIC to disclose to teachers that VALIC had paid for the teachers union’s endorsement and promotion, despite the fact that such disclosure was required by law
- VALIC paid the salaries of several employees who held themselves out as representatives of the teachers’ union entity, but were in fact VALIC employees, while promoting VALIC financial services, this arrangement was also never disclosed to teachers.
The SEC went on to detail that one of VALIC’s “primary goals” was to sell teachers their proprietary investment products, including fixed and variable annuities and a portfolio management product that charged an add-on advisory fee.
The SEC found that this conduct violated the Investment Advisers Act and ordered (1) VALIC to cease and desist from further violating the Investment Advisers Act, (2) a formal censure of VALIC, and (3) VALIC to pay a $20 million fine.
SEC Focusing On Protecting Teachers, Military Personnel
According to the SEC, teachers and military personnel have been found to be particularly susceptible to overpaying for financial services. Hopefully, the SEC’s increased scrutiny on the sale of retirement products to teachers and other public sector workers will bring to light and discourage the type of conduct that VALIC was engaged in.
Variable annuities can carry high fees and pay substantial commissions to financial advisors. Additionally, these products involve high up-front costs and/or surrender charges for unsuspecting investors. Sometimes, these fees, costs, and commissions are hidden, minimized, not disclosed, or cloaked in complex legal and financial jargon.
Financial advisers often push these products because of the high commission they will receive, without suggesting or indicating that other financial products are better suited for many customers. This may have been the case for many investors, who purchased variable annuities without knowing that VALIC made improper payments to have the teachers’ union endorse and promote its services.
Silver Law Group has been named a “Top Law Firm” in the 2020 edition the South Florida Legal Guide (SFLG), a leading guide to the best attorneys and law firms in the region. Scott Silver, Silver Law Group’s managing partner, was also individually named as a “Top Lawyer”. The lawyers and law firms included in the 2020 South Florida Legal Guide, the 20th anniversary edition, are peer-nominated based on their experience and record of achievement.
Silver Law Group is experienced in representing investors in claims related to fixed and variable annuities as well as other investment fraud matters. In fact, managing partner Scott Silver spoke at the 2019 securities arbitration conference about handling variable annuity cases. If you or someone you know experienced losses investing through VALIC or otherwise, contact Silver Law Group for a confidential consultation at (800) 975-4345 or email firstname.lastname@example.org. We represent investors on a contingency fee basis.