Finra Fines AXA Advisors for Marketing Junk Funds as Investment Grade
(Updates with quote from AXA spokesperson in fourth paragraph.)
The broker-dealer unit of AXA Equitable Life Insurance Co. agreed to pay a $600,000 fine and repay $172,000 to 401(k) retirement plan participants for marketing some junk bond funds as investment-grade, the Financial Industry Regulatory Authority said on Thursday.
For five years ending in November 2015, AXA Advisors, LLC misrepresented the credit quality of certain funds offered within group annuity contracts for the corporate retirement plans, Finra said in a letter of acceptance, waiver and consent signed by the insurance company subsidiary.
AXA, which also agreed to send affected plan participants corrective disclosures, agreed to the settlement without admitting or denying the facts, according to consent letter.
“We remain committed to transparency and accuracy in all communications and we regret this occurred,” a company spokesperson said. “We are pleased to have resolved this matter.”
The mischaracterization of junk bond funds occurred in thousands of enrollment forms, investment option attachments and other documents created by the broker-dealer’s life insurance company affiliate, according to the consent letter. About 800 retirement plans and 6,200 plan participants were affected, it said.
Finra said AXA violated three rules regarding supervisory procedures, advertising and negligent misrepresentation that violates its requirement that members observe “high standards of commercial honor and just and equitable principles of trade.”