Citing a broad breakdown with the firm's failures to supervise client and adviser information, the Financial Industry Regulatory Authority Inc. on Thursday slapped a $1 million fine on Allstate Financial Services, the broker-dealer arm of insurance giant Allstate Insurance Co.
According to the Finra settlement, Allstate Financial Services failed to supervise certain communications and transactions, as well as retain records and provide clients with required information, due to five systemic problems. Some of the problems went on as long as 15 years, according to Finra.
Allstate Financial Services neither admitted nor denied Finra's findings, according to the settlement.
“A majority of the issues raised in the settlement were self-reported, and Allstate will continue to maintain rigorous operational oversight,” said Allstate spokesman Greg Burns.
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The five areas Finra listed in which the Allstate broker-dealer fell short of industry rules and requirements ranged from not reviewing emails to improperly paying trail commissions to brokers no longer registered with the firm.
Allstate Financial did not review 44 million emails, including 11,000 with clients or otherwise relating to the firm's securities business, according to the Finra settlement.
Allstate Financial also “did not adequately supervise the use of several programs used by its registered persons to create consolidated reports, which are documents that typically combine information about most or all of a customer's financial assets, regardless of where they are held,” according to Finra.
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Next, the firm's records for about 9,000 clients were incomplete and not linked to the firm's software for sending certain notices.
“As a result, [Allstate Financial] did not verify the identity of certain of those accounts' owners, determine whether recommendations were suitable for those customers, and send required periodic account records and notices explaining the firm's privacy policies to customers,” according to Finra.
The firm also paid $587,000 of trailing commissions to 4,400 brokers who were no longer registered with the firm, as well as incorrectly labeling 2,900 client accounts as closed. Those clients did not receive required communications from the firm.
