Ameriprise’s RiverSource Settles SEC Case for $5 Million

Four years after an Ameriprise subsidiary sent disciplinary letters to some employees over variable annuity swaps, the company has settled a related SEC case that is the first of its kind.

Ameriprise’s RiverSource distributors improperly switched or replaced their variable annuities “in an effort to generate additional selling costs” for its wholesalers and registered representatives of the company’s affiliated wealth manager between January 2017 and May 2018, according to SEC Deputy Chief Enforcement Officer Sanjay Wadhwa. As part of May 25 settlement In the regulator’s first case under Section 11 of the Investment Companies Act, RiverSource agreed to pay a civil penalty of $5 million.

“Protecting retail investors from abusive sales practices is a pillar of our enforcement program, and we remain committed to holding accountable those who engage in such practices,” Wadhwa said in a statement.

Most of the relevant time in the case took place in a year when overall VA sales fell 9% to $95.6 billion – which was the first time in nearly two decades that the volumes of the complex and often controversial product fell below $100 billion. With “downward pressure” on the company, the company’s wholesalers created color-coded lists of VA “exchange opportunities,” including potential sales commissions for Ameriprise reps, according to the SEC.

RiverSource wholesalers used the listings “to encourage” reps to “offer variable annuity replacements,” the SEC said. In 2017, the company’s VA trading jumped 31% to $1.01 billion, according to the settlement. The following year, they reached $1.05 billion, he says.

With the spike, RiverSource’s compliance department investigated the transactions and sent “reprimand/warning” letters to some wholesalers, according to the SEC. Compliance staff members then conducted a training program on why the practice violated the Investment Company Act provision that prohibits underwriters from exchanging any of a company’s AVs for another without SEC approval or under certain “limited exceptions,” the rule says.

Ameriprise has neither admitted nor denied the allegations as part of the settlement.

“RiverSource Distributors is pleased to resolve this issue,” Ameriprise spokeswoman Kathleen McClung said in a statement. “We identified and quickly addressed it several years ago, including through improved training and updated policies and procedures.”

The discrepancy between the alleged underlying conduct and the announcement of the case seems “troubling” to Bill Singer, a former securities regulator and lawyer who wrote about the case on his compliance blog, Broke and broker. Singer also expressed concern about the “wrong message” the settlement order sends by not specifically stating that the company was found to have detected the conduct. Although this is the first such case, SEC Chairman Gary Gensler’s team is acting like “the people with the broom at the end of the parade,” Singer said.

“It’s something the commission should have done for the past decade,” Singer said. “Ultimately, we have to be careful with these cases because investors are not well served by these kinds of practices. … It’s a good thing. The only problem is, geez, is that the best example you could choose, when the corporate compliance department put a stop to this? »

RiverSource remains one of the largest AV transmitters in the market, with sales of $431.3 million in the first quarter, according to the LIMRA survey of individual annuity sales in the United States. Overall VA sales fell 6% year over year to $28.1 billion in the quarter.