On May 2, FINRA fined Axa for lying to 401k sponsors, members.
- AXA Advisors, LLC, misrepresentations to 401(k) plan sponsors and participants.
- Firm sells and services, group annuity contracts for employer-sponsored 401(k)
retirement plans that an affiliated life insurance company issues and administers.
Alleged Violations
- AXA advised employers to help determine what funds should be included within
group annuity contracts for 401(k) plans, which company offered to employees. - AXA distributed various documents created by affiliated life insurance company
to retirement plan sponsors, that contained list of available investment options. - This listed options including available funds, organized by underlying investment.
- Violated NASD Rule 3010 and FINRA Rule 2210 communication, 3110 and 2010.
Charges
- From 2010 to 2015, AXA distributed documents that negligently misrepresented
that 5 bonds issued were investment-grade when, many consisted of junk bonds. - Fund used by many plans, participants, had 65% of portfolio in high-yield bonds.
- Due to the misclassification, AXA distributed thousands of enrollment forms and
investment options attachments, to sponsors that were inaccurate or misleading. - 14,500 enrollment forms misclassified the credit quality, for the five bond funds.
- Misrepresentations affected 800 retirement plans having 6,200 plan participants.
Supervision
- Failed to have supervisory systems or written supervisory procedures to achieve
compliance with rules re accuracy of descriptions of credit quality of bond funds. - Relied on affiliated life insurer to classify bond funds in group annuity contracts.
Settlement
- AXA will pay restitution to participants who were invested in one or more of the
5 relevant funds and may have been adversely impacted by the misclassification. - Firm agreed to pay $772k, for misrepresentations to plan sponsors, participants.
- Including a payment of $600k fine, and $172,000 in restitution to affected plans.
- Firm was also ordered to send corrective disclosure to affected plan participants.
