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Vedder Thinking | Articles SEC Settles Charges Against Insurance Company for Allegedly Misleading Disclosures About Variable Annuity Fees


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On July 18, 2022, the SEC announced the settlement of an administrative proceeding brought against an insurance company for alleged violations of Section 17 of the Securities Act of 1933, which prohibits the offer or sale of securities by means of any untrue statement of material fact or any omission to state a material fact necessary in order to make statements made not misleading. Specifically, quarterly account statements provided to holders of certain variable annuity (VA) contracts allegedly did not include disclosure about separate account expenses (i.e., relating to, among other things, mortality and expense risks borne by the company) and portfolio operating expenses (i.e., underlying investment fund fees), which the SEC’s order described as “the most significant fees that investors paid from the fees listed on the account statements.”

Since at least 2016, the prospectus for the VA contracts disclosed that holders are charged several types of fees, including separate account expenses, portfolio operating expenses, administrative and transaction fees, and plan operating expenses. Quarterly statements for VA holders disclosed several line items on the front cover, including “Fees and Expenses,” “Net Investment Portfolio Results” and “Total Account Value.” Net Investment Portfolio Results and Total Account Value line items incorporated all fees paid because charges are reflected in annuity unit values. However, nothing in the quarterly account statement clarified that the Fees and Expenses line item included only administrative and transaction fees, which are generally incurred once per year and not on a quarterly basis. As a result, Fees and Expenses were often reported as $0.

The SEC also alleged that other sections of the quarterly account statements—such as the “Transaction Summary by Fund” and “Contribution and Fee Summary” sections— similarly failed to reflect or otherwise address separate account expenses and portfolio operating expenses. The SEC found that holders of the VA contracts continued to make purchase payments following receipt of “apparently all-inclusive” account statements in reliance on the insurance company’s disclosures.

In settlement of the charges, without admitting or denying the findings set forth in the SEC’s order, the insurance company agreed to cease and desist from violating Section 17 of the Securities Act of 1933, to revise the presentation of fee information in account statements and to pay a civil monetary penalty of $50 million.

A copy of the SEC’s order is available here.


John S. Marten


Nathaniel Segal


Jacob C. Tiedt