The Securities and Exchange Commission fined RiverSource Distributors Inc., a subsidiary of Ameriprise Financial Services LLC, $5 million for improperly switching Ameriprise customers’ variable annuities in order to generate commissions, the agency said.

The SEC found that RiverSource employees developed and implemented targeted sales practices between 2016 and 2018 to induce Ameriprise Financial Services (AFS) reps to zero in on variable annuities customers for contract switches, the SEC said yesterday.

Riversource (RDI) agreed to a cease-and-desist order, a censure and to pay a civil money penalty of $5 million to settle the SEC charges. The firm settled without admitting or denying guilt.

According to the SECs order, RDI employee efforts to get AFS customers to switch their variable annuities included in-person and virtual meetings with AFS registered representatives “during which RDI wholesalers were granted access to the AFS registered representatives’ computers, pulled customer lists and holdings, filtered the lists to focus on in-force annuities, and color-coded variable annuities based on their surrender status in order to highlight how registered representatives could increase their compensation.”

Some RDI wholesalers went so far as color-coding customer lists to highlight exchange opportunities and promoted the commissions that AFS reps could earn. Some RDI wholesalers were also trained on how to create and use these annuity exchange lists, the SEC added.

Accordingly, variable annuity exchanges increased from $671 million in 2015 to $768 million in 2016, $1,006,000 in 2017 and $1,049,000 in 2018.

RDI’s compliance department became aware of wholesalers’ exchange actions in March 2018 and attempted to put a halt to the practices by sending letters of reprimand and warning to its supervised individuals, the agency said.

RDI’s remedial efforts to end the practice also included a training program for wholesalers led by the company’s chief compliance officer, who explained in detail how the creation and use of these types of in-force annuity exchange lists violated securities laws, the SEC noted.

After the warnings and training, RDI’s variable annuity exchanges decreased to $838 million in 2019, the SEC said.

Ameriprise spokesperson Kathleen H. McClung said, "Riversource Distributors is pleased to resolve this matter. We identified and promptly addressed it several years ago, including through enhanced training and updated policies and procedures."

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