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Spitzer Targeting Financial Services Firms That Sell Variable Annuities

New York official plans to bring a case against a vendor of securities that are a hybrid of mutual funds and insurance.

February 27, 2004|From Reuters

New York Atty. Gen. Eliot Spitzer's office said it expected to file charges against a financial services company that sells variable annuities.

David Brown, the head of the attorney general's investment protection bureau, said he was probing a number of companies for allowing improper trades of variable annuities, securities that have characteristics of both mutual funds and insurance policies.

"We are very interested in the topic and intend to bring a case," Brown told Reuters. "We've investigated a number of companies in relation to this."

Brown declined to mention which insurance companies or brokerage dealers his office was probing.

Regulators have said a number of companies that sell variable annuities were being probed. Conseco Inc., a life insurer that emerged from bankruptcy protection last year, said in January that it faced potential enforcement action for improper trading by holders of variable annuities that it sold.

Conseco sold its variable annuities business, formerly called Conseco Variable Insurance Co., to Inviva Inc. in 2002.

Concern over such trading practices stems from a broader investigation of the mutual fund industry. The focus is so-called market timing, the rapid buying and selling of mutual fund shares to profit from inefficiencies in how they are priced.

Variable annuities are retirement savings contracts in which proceeds are invested in mutual funds offered by life insurance companies.

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