This is the SEC’s first-ever enforcement proceeding using Section 11 of the Investment Company Act, which prohibits underwriters like RiverSource from exchanging variable contracts unless the offer has been approved by the SEC. There are few exceptions to this rule and Riversource met none of them, the SEC said.
“Congress enacted Section 11 to prohibit the improper ‘switching’ of investors from one investment product to another for the purpose of generating additional selling charges—precisely the conduct our order finds RiverSource to have engaged in,” Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, said in a statement.
“Protecting retail investors from abusive sales practices is a mainstay of our enforcement program, and we remain committed to holding accountable those who engage in such conduct,” Wadhwa added.
As part of its evidence, the SEC said it had emails showing that in August 2017 an RDI Division vice president asked employees if they could share what was working for them to drive variable annuities sales and one responded “he was using in-force annuity lists to find exchange opportunities. In October 2017, a wholesaler explained in an internal email that in-force annuity exchange lists were among the strategies he was using,” the SEC said.