valic financial advisors, inc. · 2020-07-14 · valic financial advisors, inc. crd# 42803 sec#...

BrokerCheck Report

VALIC FINANCIAL ADVISORS, INC.

Section Title

Report Summary

Firm History

CRD# 42803

1

10

Firm Profile 2 - 9

Page(s)

Firm Operations 11 - 21

Disclosure Events 22

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CRD# 42803

SEC# 8-50018

Main Office Location

2919 ALLEN PARKWAYL3-20HOUSTON, TX 77019-2158Regulated by FINRA Dallas Office

Mailing Address

2919 ALLEN PARKWAYL3-20HOUSTON, TX 77019-2158

This firm is a brokerage firm and an investmentadviser firm. For more information aboutinvestment adviser firms, visit the SEC'sInvestment Adviser Public Disclosure website at:

Business Telephone Number

866-544-4968

https://www.adviserinfo.sec.gov

Report Summary for this Firm

This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.

Disclosure Events

Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.

Are there events disclosed about this firm? Yes

The following types of disclosures have beenreported:

Type Count

Regulatory Event 14

Arbitration 3

Firm Profile

This firm is classified as a corporation.

This firm was formed in Texas on 11/18/1996.

Its fiscal year ends in December.

Firm History

Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.

Firm Operations

Is this brokerage firm currently suspended with anyregulator? No

This firm conducts 8 types of businesses.

This firm is affiliated with financial or investmentinstitutions.

This firm has referral or financial arrangements withother brokers or dealers.

This firm is registered with:

• the SEC• 1 Self-Regulatory Organization• 51 U.S. states and territories

www.finra.org/brokercheck User Guidance

1©2020 FINRA. All rights reserved. Report about VALIC FINANCIAL ADVISORS, INC.

https://adviserinfo.sec.gov/firm/summary/42803


http://www.finra.org/brokercheck

http://www.finra.org/brokercheck_reports


This firm is classified as a corporation.

This firm was formed in Texas on 11/18/1996.

CRD#

This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.

Firm Profile

Firm Names and Locations

Its fiscal year ends in December.


SEC#

42803

8-50018

Main Office Location

Mailing Address

Business Telephone Number

Doing business as VALIC FINANCIAL ADVISORS, INC.

866-544-4968

Regulated by FINRA Dallas Office



Other Names of this Firm

Name Where is it used

AIG RETIREMENT SERVICES AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, RI,SC, SD, TN, TX, UT,VA, VT, WA, WI, WV,WY 2©2020 FINRA. All rights reserved. Report about VALIC FINANCIAL ADVISORS, INC.





AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, RI,SC, SD, TN, TX, UT,VA, VT, WA, WI, WV,WY





This section provides information relating to all direct owners and executive officers of the brokerage firm.

Direct Owners and Executive Officers

Firm Profile

Position

Percentage of Ownership

Is this a public reportingcompany?

Position Start Date

Does this owner direct themanagement or policies ofthe firm?

THE VARIABLE ANNUITY LIFE INSURANCE COMPANY

DIRECT OWNER

75% or more

No

Domestic Entity

11/1996

Yes

Is this a domestic or foreignentity or an individual?

Legal Name & CRD# (if any):

Position



Position Start Date


BATES, MARQUES

CHIEF COMPLIANCE OFFICER, BROKER-DEALER

Less than 5%

No

Individual

06/2020

Yes

4764005



Position


Position Start Date

BRODEUR, MICHAEL

PRESIDENT

Less than 5%

Individual

07/2020

2068580








Direct Owners and Executive Officers (continued)

Firm Profile




Less than 5%

No

Yes

Position



Position Start Date


BURNETTE, CYNTHIA LEA

CHIEF FINANCIAL OFFICER AND TREASURER

Less than 5%

No

Individual

06/2013

Yes

1863103



Position



Position Start Date


COTTON-HEARNE, JULIE ANN

SECRETARY

Less than 5%

No

Individual

09/2013

No

6265849



GIBSON, KRISTA

2348708








Firm Profile

Position



Position Start Date


SVP, HEAD OF PRODUCT & ADVISORY SERVICES

Less than 5%

No

Individual

11/2019

Yes

2348708


Position



Position Start Date


HAPPE, MARK JONATHAN

CHIEF COMPLIANCE OFFICER, GROUP RETIREMENT

Less than 5%

No

Individual

03/2019

No

2791955



Position


Position Start Date


ISABELLE, GILLIANE ELIZABETH

CHIEF DISTRIBUTION OFFICER

Less than 5%

Individual

07/2020

Yes

2502071









Firm Profile



No

Yes

Position



Position Start Date


O'KEEFE, MIRANDA

VP, RISK & SUPERVISION

Less than 5%

No

Individual

12/2019

Yes

2750070



Position



Position Start Date


TERWILLIGER, JOEL LESLIE

CHIEF COMPLIANCE OFFICER, VFA INVESTMENT ADVISOR

Less than 5%

No

Individual

09/2019

Yes

4856510








This section provides information relating to any indirect owners of the brokerage firm.

Indirect Owners

Firm Profile

AGC LIFE INSURANCE COMPANY

SHAREHOLDER

THE VARIABLE ANNUITY LIFE INSURANCE COMPANY

75% or more

No

Domestic Entity

12/2012

Yes



Company through whichindirect ownership isestablished

Relationship to Direct Owner

Relationship Established




AIG LIFE HOLDINGS, INC.

SHAREHOLDER

AGC LIFE INSURANCE COMPANY

75% or more

No

Domestic Entity

03/2013

Yes









AMERICAN INTERNATIONAL GROUP, INC

SAFG RETIREMENT SERVICES, INC.

Domestic Entity









Indirect Owners (continued)

Firm Profile

SHAREHOLDER


75% or more

No

04/2012

Yes








SHAREHOLDER

AIG LIFE HOLDINGS, INC.

75% or more

No

Domestic Entity

03/2013

Yes














Firm History

This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.

No information reported.






Firm Operations

RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.

This firm is currently registered with the SEC, 1 SRO and 51 U.S. states and territories.

SEC Registration Questions

This firm is registered with the SEC as:

A broker-dealer:

A broker-dealer and government securities broker or dealer:

A government securities broker or dealer only:

This firm has ceased activity as a government securities broker or dealer:

Yes

No

No

No

Federal Regulator Status Date Effective

SEC Approved 06/20/1997

Self-Regulatory Organization Status Date Effective

FINRA Approved 06/20/1997






Firm Operations

Registrations (continued)

U.S. States &Territories

Status Date Effective

Alabama Approved 09/09/1997

Alaska Approved 06/24/1997

Arizona Approved 07/18/1997

Arkansas Approved 07/18/1997

California Approved 08/07/1997

Colorado Approved 06/27/1997

Connecticut Approved 08/11/1997

Delaware Approved 06/30/1997

District of Columbia Approved 06/15/1997

Florida Approved 07/17/1997

Georgia Approved 07/10/1997

Hawaii Approved 08/04/1997

Idaho Approved 05/22/1997

Illinois Approved 06/26/1997

Indiana Approved 08/05/1997

Iowa Approved 07/02/1997

Kansas Approved 07/25/1997

Kentucky Approved 07/03/1997

Louisiana Approved 06/24/1997

Maine Approved 06/27/1997

Maryland Approved 07/28/1997

Massachusetts Approved 07/02/1997

Michigan Approved 08/12/1997

Minnesota Approved 08/01/1997

Mississippi Approved 08/15/1997

Missouri Approved 08/01/1997

Montana Limited 06/25/1997

Nebraska Approved 07/17/1997

Nevada Approved 06/23/1997

New Hampshire Approved 07/15/1997

New Jersey Approved 07/22/1997

New Mexico Approved 07/02/1997

New York Approved 07/14/1997

U.S. States &Territories

Status Date Effective

North Carolina Approved 07/01/1997

North Dakota Approved 07/08/1997

Ohio Approved 07/03/1997

Oklahoma Approved 07/25/1997

Oregon Approved 07/03/1997

Pennsylvania Approved 07/09/1997

Rhode Island Approved 07/14/1997

South Carolina Approved 07/11/1997

South Dakota Approved 06/24/1997

Tennessee Approved 08/13/1997

Texas Approved 06/12/1997

Utah Approved 06/27/1997

Vermont Approved 08/21/1997

Virginia Approved 07/31/1997

Washington Approved 07/08/1997

West Virginia Approved 06/23/1997

Wisconsin Approved 07/17/1997

Wyoming Approved 07/02/1997






Firm Operations

Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.

Other Types of Business

This firm does not effect transactions in commodities, commodity futures, or commodity options.This firm does engage in other non-securities business.

Non-Securities Business Description: 11B INSURANCE PRODUCTS SUCH AS GIC'S

This firm currently conducts 8 types of businesses.

Types of Business

Broker or dealer selling corporate debt securities

Mutual fund underwriter or sponsor

Mutual fund retailer

Municipal securities broker

Broker or dealer selling variable life insurance or annuities

Investment advisory services

Non-exchange member arranging for transactions in listed securities by exchange member

Other - 10Y INSURANCE PRODUCTS SUCH AS GIC'S






Firm Operations

Clearing Arrangements

This firm does not hold or maintain funds or securities or provide clearing services for other broker-dealer(s).

Introducing Arrangements

This firm does refer or introduce customers to other brokers and dealers.

Name: NATIONAL FINANCIAL SERVICES LLC

Business Address: 200 SEAPORT BLVD.BOSTON, MA 02210

CRD #: 13041

Effective Date: 02/22/2000

Description: APPLICANT WILL INTRODUCE CUSTOMERS TO NATIONAL FINANCIALSERVICES LLC TO INITIALLY PURCHASE MUTUAL FUNDS AND TOCONDUCT GENERAL SECURITIES BUSINESS AFTER APPROVAL






Firm Operations

Industry Arrangements

This firm does have books or records maintained by a third party.

This firm does not have accounts, funds, or securities maintained by a third party.

This firm does have customer accounts, funds, or securities maintained by a third party.

Name: SMARSH, INC.

Business Address: 851 SW 6TH STREETPORTLAND, OR 97204


Description: THE FIRM PROVIDES EMAIL SUPERVISION SOFTWARE/ARCHIVINGSERVICES FOR VALIC FINANCIAL ADVISORS.

Name: REGED

Business Address: 2100 GATEWAY CENTRE BLVDMORRISVILLE, NC 27560


Description: REGED MAINTAINS DATA RELATING TO VALIC FINANCIAL ADVISORS'ANNUAL COMPLIANCE MEETING, COMPLIANCE QUESTIONNAIRES,FIRM ELEMENT CONTINUING EDUCATION, AND BRANCH OFFICEEXAMINATIONS.

Name: VERITAS TECHNOLOGIES LLC (LIVE OFFICE)

Business Address: 500 EAST MIDDLEFIELD ROADMOUNTAIN VIEW, CA 94043


Description: VERITAS ADVISORMAIL - THE FIRM PROVIDES EMAIL SUPERVISIONSOFTWARE/ARCHIVING SERVICES FOR VALIC FINANCIAL ADVISORS.

Name: IRON MOUNTAIN STORAGE

Business Address: 5249 GLENMONTHOUSTON, TX 77081


Description: THIS LOCATION IS USED FOR OFF-SITE STORAGE OF COMPANYRECORDS AND INFORMATION RELATING TO VARIOUS DEPARTMENTSIN THE COMPANY.

Name: NATIONAL FINANCIAL SERVICES LLC

CRD #: 13041 15©2020 FINRA. All rights reserved. Report about VALIC FINANCIAL ADVISORS, INC.





Firm Operations

Industry Arrangements (continued)

This firm does not have individuals who control its management or policies through agreement.

This firm does not have individuals who wholly or partly finance the firm's business.

Control Persons/Financing

Business Address: 200 SEAPORT BLVD.BOSTON, MA 02210

CRD #: 13041


Description: NATIONAL FINANCIAL SERVICES LLC WILL HOLD CUSTOMERS'ACCOUNTS, FUNDS AND SECURITIES FOR APPLICANT.






Firm Operations

Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.

This firm is, directly or indirectly:

· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.

Yes

Yes

No

07/18/2018

29 RICHMOND ROADPEMBROKE, BERMUDA HM08

165909

ALPHACAT is under common control with the firm.

ENTITY UNDER COMMON CONTROL AND OWNERSHIP THROUGH AIG'SOWNERSHIP OF VALIDUS.

Description:

Investment AdvisoryActivities:

Securities Activities:

Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

Yes

Yes

No

05/18/2018

101 S TRYON STREETSUITE 2700CHARLOTTE, NC 28280

288194

COVENANT CREDIT PARTNERS, LP is under common control with the firm.

COVENANT CREDIT PARTNERS, LP IS UNDER COMMON CONTROLTHROUGH OWNERSHIP THROUGH AIG, INC.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:






Firm Operations

Organization Affiliates (continued)COVENANT CREDIT PARTNERS, LP IS UNDER COMMON CONTROLTHROUGH OWNERSHIP THROUGH AIG, INC.

Description:

Yes

No

No

04/08/2016

299 PARK AVENUEFLOOR 3NEW YORK, NY 10171

281851

VARAGON CAPITAL PARTNERS, L.P. is under common control with the firm.

VARAGON CAPITAL PARTNERS, L.P. IS AN AFFILIATE OF AIG, THE ULTIMATEPARENT COMPANY OF VALIC FINANCIAL ADVISORS, INC.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

Yes

No

No

09/15/2015

140 BROADWAY21ST FLOORNEW YORK, NY 10005

132466

FIRST PRINCIPLES CAPITAL MANAGEMENT, LLC is under common control with the firm.

APPLICANT AND AFFILIATE ARE EACH UNDER THE ULTIMATE CONTROL OFAIG.

Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

80 PINE STREET4TH FLOORNEW YORK, NY 10005

157767

AIG GLOBAL CAPITAL MARKETS SECURITIES, LLC is under common control with the firm.

Business Address:

CRD #:






Firm Operations

Organization Affiliates (continued)

No

Yes

No

03/28/2012

80 PINE STREET4TH FLOORNEW YORK, NY 10005


Description:



Country:

Foreign Entity:

Effective Date:

Yes

No

UNITED KINGDON

Yes

01/04/2010

5TH FLOOR ONE CURZON STREETLONDON, UNITED KINGDOM W1J 5RT

AIG ASSET MANAGEMENT (EUROPE) LIMITED is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

Yes

No

No

05/13/2009

180 MAIDEN LANENEW YORK, NY 10038

150088

AIG ASSET MANAGEMENT (U.S.), LLC is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:






Firm Operations

Organization Affiliates (continued)APPLICANT AND AFFILIATE ARE EACH UNDER THE ULTIMATE CONTROL OFAIG.

Description:

Yes

Yes

IRELAND

Yes

04/04/1991

AIG CENTRENORTH WALL QUAYDUBLIN 1, IRELAND 99999

AIG SECURITIES LENDING (IRELAND) LTD. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

No

Yes

No

12/31/2013

HARBORSIDE 5185 HUDSON STREET, STUITE 3300JERSEY CITY, NJ 07311

13158

AIG CAPITAL SERVICES, INC. is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

12/31/2013

HARBORSIDE 5185 HUDSON STREET, STUITE 3300JERSEY CITY, NJ 07311

107338

SUNAMERICA ASSET MANAGEMENT, LLC is under common control with the firm.

Effective Date:

Business Address:

CRD #:






Firm Operations

Organization Affiliates (continued)

Yes

No

No

12/31/2013


Description:



Country:

Foreign Entity:

Effective Date:

Yes

No

No

11/18/1996

2929 ALLEN PARKWAYHOUSTON, TX 77019

104561

THE VARIABLE ANNUITY LIFE INSURANCE COMPANY is under common control with the firm.


Description:



Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

This firm is not directly or indirectly, controlled by the following:

· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank






Disclosure Events

All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.

Final On AppealPending

Regulatory Event 0 14 0

Arbitration N/A 3 N/A






Disclosure Event Details

What you should know about reported disclosure events:

1. BrokerCheck provides details for any disclosure event that was reported in CRD. It also includessummary information regarding FINRA arbitration awards in cases where the brokerage firm wasnamed as a respondent.

2. Certain thresholds must be met before an event is reported to CRD, for example: o A law enforcement agency must file formal charges before a brokerage firm is required to disclose a

particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:

o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.

4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.

§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently

being appealed.§ A "final" event has been concluded and its resolution is not subject to change.

o A final event generally has a disposition of adjudicated, settled or otherwise resolved.§ An "adjudicated" matter includes a disposition by (1) a court of law in a criminal or civil matter,

or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.

§ A "settled" matter generally involves an agreement by the parties to resolve the matter.Please note that firms may choose to settle customer disputes or regulatory matters forbusiness or other reasons.

§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.

5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.

Regulatory - Final

This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.

Disclosure 1 of 14

Reporting Source: Regulator

Allegations: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATEAND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTEDPURSUANT TO SECTION 15(B) OF THE SECURITIES EXCHANGE ACT OF1934 (EXCHANGE ACT) AND SECTIONS 203(E) AND 203(K) OF THEINVESTMENT ADVISERS ACT OF 1940 (ADVISERS ACT) AGAINST VALICFINANCIAL ADVISORS, INC. (VFA). VFA BREACHED ITS FIDUCIARY DUTY TOITS CLIENTS IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASSSELECTION PRACTICES WITH REGARD TO ITS RECEIPT OF REVENUESHARING, AVOIDANCE OF TRANSACTION FEES, AND RECEIPT OFCOMPENSATION PURSUANT TO RULE 12B-1 UNDER THE INVESTMENTCOMPANY ACT OF 1940, AS WELL AS ITS DUTY TO SEEK BEST EXECUTION.VFA HAS WRAP FEE ARRANGEMENTS WITH CLIENTS THAT ALLOW IT TORECOMMEND PORTFOLIO MODELS MANAGED BY THIRD-PARTYINVESTMENT ADVISERS. VFA INSTRUCTED A THIRD-PARTY ADVISER TOSELECT FROM MUTUAL FUNDS AVAILABLE IN THE NO-TRANSACTION-FEEPROGRAM OFFERED BY VFA'S CLEARING FIRM WHEN ADDING A NEWFUND TO A MODEL. THE SELECTION OF NTF FUNDS PROVIDED KEYFINANCIAL BENEFITS TO VFA. VFA'S AGREEMENT WITH ITS CLEARINGFIRM PROVIDED THAT THE CLEARING FIRM WOULD PAY VFA A PORTION OFTHE REVENUE THE CLEARING FIRM RECEIVED FROM THE MUTUAL FUNDSPONSOR TO INCLUDE ITS FUNDS IN THE NTF PROGRAM AND ANY 12B-1FEES PAID ON CLIENT MUTUAL FUND INVESTMENTS. THERE WERE MANY12B-1 FEE-PAYING MUTUAL FUND SHARE CLASSES IN THE NTF PROGRAM,AND VFA RECEIVED REVENUE SHARING ONLY FOR MUTUAL FUNDSINCLUDED IN THE NTF PROGRAM. IN MOST INSTANCES, THE MUTUALFUNDS THE THIRD-PARTY ADVISER SELECTED HAD A LOWER-COSTSHARE CLASS AVAILABLE THAT EITHER DID NOT PAY 12B-1 FEES OR THATWOULD NOT HAVE LED TO VFA RECEIVING REVENUE SHARING. AS ARESULT, CLIENTS WERE GENERALLY INVESTED IN MORE EXPENSIVEMUTUAL FUNDS AND MUTUAL FUND SHARE CLASSES. VFA HAD AGREEDTO PAY EXECUTION COSTS FOR CLIENTS PARTICIPATING IN ITS WRAP FEEPROGRAMS, BUT BY INSTRUCTING THE THIRD-PARTY ADVISER TO LIMITNEW FUNDS TO THOSE IN THE NTF PROGRAM FOR WHICH VFA WOULDNOT PAY ANY EXECUTION COSTS, VFA AVOIDED PAYING ANY EXECUTIONCOSTS FOR THE CLIENTS' PURCHASES OR SALES OF THE MUTUAL FUNDSIN THE NTF PROGRAM. VFA DID NOT DISCLOSE THAT IT HAD PROVIDEDTHIS INSTRUCTION TO THE THIRD-PARTY ADVISER OR THE CONFLICTS OFINTEREST RELATED THERETO. RATHER, VFA PROVIDED FALSE ANDMISLEADING DISCLOSURES REGARDING THESE ISSUES. SIMILARLY, WHENVFA DIRECTLY PURCHASED, RECOMMENDED, OR HELD MUTUAL FUNDSFOR ADVISORY CLIENTS, VFA ALSO RECEIVED 12B-1 FEES AND REVENUESHARING AND (AS TO WRAP FEE ACCOUNTS) AVOIDED PAYING CERTAINTRANSACTION FEES WHILE PROVIDING MISLEADING DISCLOSURES. INADDITION, AS TO THESE CLIENTS, BY CAUSING THEM TO INVEST IN MOREEXPENSIVE SHARE CLASSES, WHEN SHARE CLASSES OF THE SAMEFUNDS WERE AVAILABLE THAT PRESENTED A MORE FAVORABLE VALUEUNDER THE PARTICULAR CIRCUMSTANCES IN PLACE AT THE TIME OF THETRANSACTION, VFA ALSO VIOLATED ITS DUTY TO SEEK BEST EXECUTIONFOR THOSE TRANSACTIONS. AS A RESULT OF THIS CONDUCT, VFARECEIVED OVER $13.2 MILLION IN FINANCIAL BENEFITS. VFA DISCLOSEDFOR THE FIRST TIME THE RECEIPT OF REVENUE SHARING, BUT STILL DIDNOT FULLY AND FAIRLY DISCLOSE THAT CONFLICT OF INTEREST. VFAINSTRUCTED ITS CLEARING FIRM TO STOP PAYING REVENUE SHARING TOVFA, BUT LEFT ITS CLIENTS IN THE HIGHER-COST SHARE CLASSES UNTILLATER, WHEN VFA BEGAN THE PROCESS OF CONVERTING CLIENTMUTUAL FUND INVESTMENTS TO AVAILABLE LOWER-COST SHARECLASSES OF THE SAME FUNDS. AFTER BEING CONTACTED BYCOMMISSION STAFF, VFA BEGAN REIMBURSING TO CLIENTS ALL 12B-1FEES IT RECEIVED WHEN IT BEGAN CONTEMPORANEOUSLY REBATING12B-1 FEES TO CLIENTS. AS A RESULT, VFA HAS REPAID CLIENTSAPPROXIMATELY $2.3 MILLION IN 12B-1 FEES, PLUS INTEREST. VFA,ALTHOUGH ELIGIBLE TO DO SO, DID NOT SELF-REPORT TO THECOMMISSION PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARECLASS SELECTION DISCLOSURE INITIATIVE. VFA WILLFULLY VIOLATEDSECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7THEREUNDER.

Current Status: Final






Allegations: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATEAND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTEDPURSUANT TO SECTION 15(B) OF THE SECURITIES EXCHANGE ACT OF1934 (EXCHANGE ACT) AND SECTIONS 203(E) AND 203(K) OF THEINVESTMENT ADVISERS ACT OF 1940 (ADVISERS ACT) AGAINST VALICFINANCIAL ADVISORS, INC. (VFA). VFA BREACHED ITS FIDUCIARY DUTY TOITS CLIENTS IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASSSELECTION PRACTICES WITH REGARD TO ITS RECEIPT OF REVENUESHARING, AVOIDANCE OF TRANSACTION FEES, AND RECEIPT OFCOMPENSATION PURSUANT TO RULE 12B-1 UNDER THE INVESTMENTCOMPANY ACT OF 1940, AS WELL AS ITS DUTY TO SEEK BEST EXECUTION.VFA HAS WRAP FEE ARRANGEMENTS WITH CLIENTS THAT ALLOW IT TORECOMMEND PORTFOLIO MODELS MANAGED BY THIRD-PARTYINVESTMENT ADVISERS. VFA INSTRUCTED A THIRD-PARTY ADVISER TOSELECT FROM MUTUAL FUNDS AVAILABLE IN THE NO-TRANSACTION-FEEPROGRAM OFFERED BY VFA'S CLEARING FIRM WHEN ADDING A NEWFUND TO A MODEL. THE SELECTION OF NTF FUNDS PROVIDED KEYFINANCIAL BENEFITS TO VFA. VFA'S AGREEMENT WITH ITS CLEARINGFIRM PROVIDED THAT THE CLEARING FIRM WOULD PAY VFA A PORTION OFTHE REVENUE THE CLEARING FIRM RECEIVED FROM THE MUTUAL FUNDSPONSOR TO INCLUDE ITS FUNDS IN THE NTF PROGRAM AND ANY 12B-1FEES PAID ON CLIENT MUTUAL FUND INVESTMENTS. THERE WERE MANY12B-1 FEE-PAYING MUTUAL FUND SHARE CLASSES IN THE NTF PROGRAM,AND VFA RECEIVED REVENUE SHARING ONLY FOR MUTUAL FUNDSINCLUDED IN THE NTF PROGRAM. IN MOST INSTANCES, THE MUTUALFUNDS THE THIRD-PARTY ADVISER SELECTED HAD A LOWER-COSTSHARE CLASS AVAILABLE THAT EITHER DID NOT PAY 12B-1 FEES OR THATWOULD NOT HAVE LED TO VFA RECEIVING REVENUE SHARING. AS ARESULT, CLIENTS WERE GENERALLY INVESTED IN MORE EXPENSIVEMUTUAL FUNDS AND MUTUAL FUND SHARE CLASSES. VFA HAD AGREEDTO PAY EXECUTION COSTS FOR CLIENTS PARTICIPATING IN ITS WRAP FEEPROGRAMS, BUT BY INSTRUCTING THE THIRD-PARTY ADVISER TO LIMITNEW FUNDS TO THOSE IN THE NTF PROGRAM FOR WHICH VFA WOULDNOT PAY ANY EXECUTION COSTS, VFA AVOIDED PAYING ANY EXECUTIONCOSTS FOR THE CLIENTS' PURCHASES OR SALES OF THE MUTUAL FUNDSIN THE NTF PROGRAM. VFA DID NOT DISCLOSE THAT IT HAD PROVIDEDTHIS INSTRUCTION TO THE THIRD-PARTY ADVISER OR THE CONFLICTS OFINTEREST RELATED THERETO. RATHER, VFA PROVIDED FALSE ANDMISLEADING DISCLOSURES REGARDING THESE ISSUES. SIMILARLY, WHENVFA DIRECTLY PURCHASED, RECOMMENDED, OR HELD MUTUAL FUNDSFOR ADVISORY CLIENTS, VFA ALSO RECEIVED 12B-1 FEES AND REVENUESHARING AND (AS TO WRAP FEE ACCOUNTS) AVOIDED PAYING CERTAINTRANSACTION FEES WHILE PROVIDING MISLEADING DISCLOSURES. INADDITION, AS TO THESE CLIENTS, BY CAUSING THEM TO INVEST IN MOREEXPENSIVE SHARE CLASSES, WHEN SHARE CLASSES OF THE SAMEFUNDS WERE AVAILABLE THAT PRESENTED A MORE FAVORABLE VALUEUNDER THE PARTICULAR CIRCUMSTANCES IN PLACE AT THE TIME OF THETRANSACTION, VFA ALSO VIOLATED ITS DUTY TO SEEK BEST EXECUTIONFOR THOSE TRANSACTIONS. AS A RESULT OF THIS CONDUCT, VFARECEIVED OVER $13.2 MILLION IN FINANCIAL BENEFITS. VFA DISCLOSEDFOR THE FIRST TIME THE RECEIPT OF REVENUE SHARING, BUT STILL DIDNOT FULLY AND FAIRLY DISCLOSE THAT CONFLICT OF INTEREST. VFAINSTRUCTED ITS CLEARING FIRM TO STOP PAYING REVENUE SHARING TOVFA, BUT LEFT ITS CLIENTS IN THE HIGHER-COST SHARE CLASSES UNTILLATER, WHEN VFA BEGAN THE PROCESS OF CONVERTING CLIENTMUTUAL FUND INVESTMENTS TO AVAILABLE LOWER-COST SHARECLASSES OF THE SAME FUNDS. AFTER BEING CONTACTED BYCOMMISSION STAFF, VFA BEGAN REIMBURSING TO CLIENTS ALL 12B-1FEES IT RECEIVED WHEN IT BEGAN CONTEMPORANEOUSLY REBATING12B-1 FEES TO CLIENTS. AS A RESULT, VFA HAS REPAID CLIENTSAPPROXIMATELY $2.3 MILLION IN 12B-1 FEES, PLUS INTEREST. VFA,ALTHOUGH ELIGIBLE TO DO SO, DID NOT SELF-REPORT TO THECOMMISSION PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARECLASS SELECTION DISCLOSURE INITIATIVE. VFA WILLFULLY VIOLATEDSECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7THEREUNDER.






Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Principal Sanction(s)/ReliefSought:

Cease and Desist

Other Sanction(s)/ReliefSought:

Date Initiated: 07/28/2020

Docket/Case Number: 3-19895

Principal Product Type: Mutual Fund(s)

Other Product Type(s):

THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATEAND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTEDPURSUANT TO SECTION 15(B) OF THE SECURITIES EXCHANGE ACT OF1934 (EXCHANGE ACT) AND SECTIONS 203(E) AND 203(K) OF THEINVESTMENT ADVISERS ACT OF 1940 (ADVISERS ACT) AGAINST VALICFINANCIAL ADVISORS, INC. (VFA). VFA BREACHED ITS FIDUCIARY DUTY TOITS CLIENTS IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASSSELECTION PRACTICES WITH REGARD TO ITS RECEIPT OF REVENUESHARING, AVOIDANCE OF TRANSACTION FEES, AND RECEIPT OFCOMPENSATION PURSUANT TO RULE 12B-1 UNDER THE INVESTMENTCOMPANY ACT OF 1940, AS WELL AS ITS DUTY TO SEEK BEST EXECUTION.VFA HAS WRAP FEE ARRANGEMENTS WITH CLIENTS THAT ALLOW IT TORECOMMEND PORTFOLIO MODELS MANAGED BY THIRD-PARTYINVESTMENT ADVISERS. VFA INSTRUCTED A THIRD-PARTY ADVISER TOSELECT FROM MUTUAL FUNDS AVAILABLE IN THE NO-TRANSACTION-FEEPROGRAM OFFERED BY VFA'S CLEARING FIRM WHEN ADDING A NEWFUND TO A MODEL. THE SELECTION OF NTF FUNDS PROVIDED KEYFINANCIAL BENEFITS TO VFA. VFA'S AGREEMENT WITH ITS CLEARINGFIRM PROVIDED THAT THE CLEARING FIRM WOULD PAY VFA A PORTION OFTHE REVENUE THE CLEARING FIRM RECEIVED FROM THE MUTUAL FUNDSPONSOR TO INCLUDE ITS FUNDS IN THE NTF PROGRAM AND ANY 12B-1FEES PAID ON CLIENT MUTUAL FUND INVESTMENTS. THERE WERE MANY12B-1 FEE-PAYING MUTUAL FUND SHARE CLASSES IN THE NTF PROGRAM,AND VFA RECEIVED REVENUE SHARING ONLY FOR MUTUAL FUNDSINCLUDED IN THE NTF PROGRAM. IN MOST INSTANCES, THE MUTUALFUNDS THE THIRD-PARTY ADVISER SELECTED HAD A LOWER-COSTSHARE CLASS AVAILABLE THAT EITHER DID NOT PAY 12B-1 FEES OR THATWOULD NOT HAVE LED TO VFA RECEIVING REVENUE SHARING. AS ARESULT, CLIENTS WERE GENERALLY INVESTED IN MORE EXPENSIVEMUTUAL FUNDS AND MUTUAL FUND SHARE CLASSES. VFA HAD AGREEDTO PAY EXECUTION COSTS FOR CLIENTS PARTICIPATING IN ITS WRAP FEEPROGRAMS, BUT BY INSTRUCTING THE THIRD-PARTY ADVISER TO LIMITNEW FUNDS TO THOSE IN THE NTF PROGRAM FOR WHICH VFA WOULDNOT PAY ANY EXECUTION COSTS, VFA AVOIDED PAYING ANY EXECUTIONCOSTS FOR THE CLIENTS' PURCHASES OR SALES OF THE MUTUAL FUNDSIN THE NTF PROGRAM. VFA DID NOT DISCLOSE THAT IT HAD PROVIDEDTHIS INSTRUCTION TO THE THIRD-PARTY ADVISER OR THE CONFLICTS OFINTEREST RELATED THERETO. RATHER, VFA PROVIDED FALSE ANDMISLEADING DISCLOSURES REGARDING THESE ISSUES. SIMILARLY, WHENVFA DIRECTLY PURCHASED, RECOMMENDED, OR HELD MUTUAL FUNDSFOR ADVISORY CLIENTS, VFA ALSO RECEIVED 12B-1 FEES AND REVENUESHARING AND (AS TO WRAP FEE ACCOUNTS) AVOIDED PAYING CERTAINTRANSACTION FEES WHILE PROVIDING MISLEADING DISCLOSURES. INADDITION, AS TO THESE CLIENTS, BY CAUSING THEM TO INVEST IN MOREEXPENSIVE SHARE CLASSES, WHEN SHARE CLASSES OF THE SAMEFUNDS WERE AVAILABLE THAT PRESENTED A MORE FAVORABLE VALUEUNDER THE PARTICULAR CIRCUMSTANCES IN PLACE AT THE TIME OF THETRANSACTION, VFA ALSO VIOLATED ITS DUTY TO SEEK BEST EXECUTIONFOR THOSE TRANSACTIONS. AS A RESULT OF THIS CONDUCT, VFARECEIVED OVER $13.2 MILLION IN FINANCIAL BENEFITS. VFA DISCLOSEDFOR THE FIRST TIME THE RECEIPT OF REVENUE SHARING, BUT STILL DIDNOT FULLY AND FAIRLY DISCLOSE THAT CONFLICT OF INTEREST. VFAINSTRUCTED ITS CLEARING FIRM TO STOP PAYING REVENUE SHARING TOVFA, BUT LEFT ITS CLIENTS IN THE HIGHER-COST SHARE CLASSES UNTILLATER, WHEN VFA BEGAN THE PROCESS OF CONVERTING CLIENTMUTUAL FUND INVESTMENTS TO AVAILABLE LOWER-COST SHARECLASSES OF THE SAME FUNDS. AFTER BEING CONTACTED BYCOMMISSION STAFF, VFA BEGAN REIMBURSING TO CLIENTS ALL 12B-1FEES IT RECEIVED WHEN IT BEGAN CONTEMPORANEOUSLY REBATING12B-1 FEES TO CLIENTS. AS A RESULT, VFA HAS REPAID CLIENTSAPPROXIMATELY $2.3 MILLION IN 12B-1 FEES, PLUS INTEREST. VFA,ALTHOUGH ELIGIBLE TO DO SO, DID NOT SELF-REPORT TO THECOMMISSION PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARECLASS SELECTION DISCLOSURE INITIATIVE. VFA WILLFULLY VIOLATEDSECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7THEREUNDER.

Resolution Date: 07/28/2020

Resolution:

Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?

Yes

Sanctions Ordered: CensureMonetary/Fine $4,500,000.00Disgorgement/RestitutionCease and Desist/Injunction

Order






Other Sanctions Ordered: UNDERTAKINGS

Sanction Details: THE FIRM WAS ORDERED TO CEASE AND DESIST FROM COMMITTING ORCAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7PROMULGATED THEREUNDER, CENSURED, ORDERED TO PAYDISGORGEMENT OF $13,232,681 AND PREJUDGMENT INTEREST OF$2,211,072, ORDERED TO PAY A CIVIL MONETARY PENALTY IN THE AMOUNTOF $4.5 MILLION AND SHALL COMPLY WITH THE UNDERTAKINGSENUMERATED IN THE ORDER.

Regulator Statement RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER")WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. AS A RESULT OFITS CONDUCT, THE FIRM WILLFULLY VIOLATED SECTIONS 206(2) AND206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER.ACCORDINGLY, IT IS HEREBY ORDERED THAT: THE FIRM CEASE ANDDESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANYFUTURE VIOLATIONS OF SECTIONS 206(2) AND 206(4) OF THE ADVISERSACT AND RULE 206(4)-7 PROMULGATED THEREUNDER; IS CENSURED;SHALL PAY DISGORGEMENT OF $13,232,681 AND PREJUDGMENT INTERESTOF $2,211,072; SHALL PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF$4.5 MILLION; AND SHALL COMPLY WITH THE UNDERTAKINGSENUMERATED IN THE ORDER.


iReporting Source: Firm

Allegations: ON JULY 28, 2020, THE UNITED STATES SECURITIES AND EXCHANGECOMMISSION ("SEC") ISSUED AN ADMINISTRATIVE ORDER AGAINST VALICFINANCIAL ADVISORS, INC. ("VFA") REGARDING CERTAIN VFA MUTUALFUND AND MUTUAL FUND SHARE CLASS SELECTION PRACTICES.SPECIFICALLY, THE SEC FOUND THAT THE FIRM HAD NOT APPROPRIATELYDISCLOSED CERTAIN CONFLICTS OF INTEREST DUE TO ITS RECEIPT OFREVENUE SHARING, AVOIDANCE OF TRANSACTION FEES, AND RECEIPTOF 12B-1 FEES, IN VIOLATION OF SECTION 206(2) OF THE ADVISERS ACT.THE SEC ALSO FOUND THAT VFA DID NOT ADOPT AND IMPLEMENTWRITTEN COMPLIANCE POLICIES AND PROCEDURES REASONABLYDESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACT AND THERULES THEREUNDER IN CONNECTION WITH ITS MUTUAL FUND SHARECLASS SELECTION PRACTICES, IN VIOLATION OF SECTION 206(4) OF THEADVISERS ACT OF 1940 AND RULE 206(4)-7 THEREUNDER. VFA NEITHERADMITTED NOR DENIED THE SEC'S FINDINGS.







Initiated By: SECURITIES & EXCHANGE COMMISSION


Cease and Desist


CENSURE, CIVIL PENALTY, DISGORGEMENT AND UNDERTAKINGS


Docket/Case Number: ADMINISTRATIVE PROCEEDING FILE NO. 3-19895



ON JULY 28, 2020, THE UNITED STATES SECURITIES AND EXCHANGECOMMISSION ("SEC") ISSUED AN ADMINISTRATIVE ORDER AGAINST VALICFINANCIAL ADVISORS, INC. ("VFA") REGARDING CERTAIN VFA MUTUALFUND AND MUTUAL FUND SHARE CLASS SELECTION PRACTICES.SPECIFICALLY, THE SEC FOUND THAT THE FIRM HAD NOT APPROPRIATELYDISCLOSED CERTAIN CONFLICTS OF INTEREST DUE TO ITS RECEIPT OFREVENUE SHARING, AVOIDANCE OF TRANSACTION FEES, AND RECEIPTOF 12B-1 FEES, IN VIOLATION OF SECTION 206(2) OF THE ADVISERS ACT.THE SEC ALSO FOUND THAT VFA DID NOT ADOPT AND IMPLEMENTWRITTEN COMPLIANCE POLICIES AND PROCEDURES REASONABLYDESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACT AND THERULES THEREUNDER IN CONNECTION WITH ITS MUTUAL FUND SHARECLASS SELECTION PRACTICES, IN VIOLATION OF SECTION 206(4) OF THEADVISERS ACT OF 1940 AND RULE 206(4)-7 THEREUNDER. VFA NEITHERADMITTED NOR DENIED THE SEC'S FINDINGS.


Resolution:

Other Sanctions Ordered: VFA ALSO AGREED TO REVIEW AND CORRECT AS NECESSARY ALLRELEVANT DISCLOSURE DOCUMENTS CONCERNING MUTUAL FUNDSHARE CLASS SELECTION, REVENUE SHARING, TRANSACTION FEES, AND12B-1 FEES, AND TO COMPLY WITH CERTAIN OTHER RELATEDUNDERTAKINGS AS WELL.

Sanction Details: SOLELY FOR THE PURPOSE OF SETTLING THIS PROCEEDING, VFACONSENTED TO A CEASE-AND-DESIST ORDER, A CENSURE, TO PAY TOAFFECTED INVESTORS DISGORGEMENT OF $13,232,681 ANDPREJUDGMENT INTEREST OF $2,211,072, AND TO PAY A $4.5 MILLION CIVILMONETARY PENALTY, WHICH WAS PAID ON AUGUST 7, 2020.

Firm Statement THE ALLEGATIONS, DISPOSITIONS, FINDINGS AND SANCTIONS OF THEORDER ARE DESCRIBED ABOVE IN ITEMS 7 AND 12.


Settled

Disclosure 2 of 14

i


Allegations: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED PURSUANT TO SECTION 15(B) OF THESECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AND SECTIONS203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940("ADVISERS ACT"), AGAINST VALIC FINANCIAL ADVISORS, INC. ("VFA" OR "RESPONDENT"). THE COMMISSION FINDS THAT FROM OCTOBER 2006 TOLATE 2019, VFA FAILED TO DISCLOSE TO CERTAIN FLORIDA TEACHERSWHO WERE POTENTIAL AND ACTUAL CLIENTS THAT VFA'S PARENT, THEVARIABLE ANNUITY LIFE INSURANCE COMPANY, DOING BUSINESS UNDERTHE AIG RETIREMENT SERVICES, INC. BRAND ("VALIC"), WAS PROVIDINGCASH AND OTHER FINANCIAL BENEFITS TO A FOR-PROFIT COMPANYOWNED BY FLORIDA K-12 TEACHERS' UNIONS. THAT COMPANY (THE "TEACHERS UNION ENTITY") RECEIVED CASH AND OTHER FINANCIALBENEFITS IN EXCHANGE FOR REFERRING TEACHERS TO VALIC'S ANDVFA'S PRODUCTS AND SERVICES. SPECIFICALLY, VFA RECEIVED THEFOLLOWING BENEFITS FROM THIS FINANCIAL ARRANGEMENT: (1) THETEACHERS UNION ENTITY MADE VFA ITS PREFERRED FINANCIALSERVICES PARTNER FOR MEMBERS, WHO WERE ALL FLORIDA PUBLICSCHOOL K-12 TEACHERS AND OTHER PUBLIC EDUCATION EMPLOYEES("K-12 TEACHERS"), (2) VFA WAS GIVEN INCREASED OPPORTUNITIES TOSELL ITS INVESTMENT PRODUCTS AND SERVICES TO K-12 TEACHERS NOTAFFORDED OTHER ADVISERS, AND (3) THREE FULL-TIME VALICEMPLOYEES, CALLED MEMBER BENEFIT COORDINATORS ("MBCS"), WEREDECEPTIVELY IDENTIFIED AS THE TEACHERS UNION ENTITY'SEMPLOYEES, INSTEAD OF AS VALIC EMPLOYEES, AT VARIOUSRETIREMENT PLANNING SEMINARS AND BENEFIT EVENTS ATTENDED BYK-12 TEACHERS AND REFERRED K-12 TEACHERS TO VFA FORINVESTMENT ADVISORY SERVICES. VFA'S CONDUCT CONSTITUTED ACOURSE OF BUSINESS WHICH OPERATED AS A FRAUD OR DECEIT UPONCLIENTS AND PROSPECTIVE CLIENTS, AND AS A RESULT, VFA VIOLATEDSECTIONS 206(2) AND SECTION 206(4) OF THE INVESTMENT ADVISERS ACTOF 1940, AND RULES 206(4)-3 AND 206(4)-7 THEREUNDER. DURING THETIME PERIOD THE TEACHERS UNION ENTITY AND THE MBCS REFERRED K-12 TEACHERS TO VFA, VFA EARNED MILLIONS OF DOLLARS IN FEES FROMTHE INVESTMENT PRODUCTS IT SOLD TO K-12 TEACHERS. AT NO TIMEDURING THE RELATIONSHIP BETWEEN THE TEACHERS UNION ENTITY ANDVALIC, WERE THE K-12 TEACHERS TOLD THAT VALIC WAS MAKINGPAYMENTS TO THE TEACHERS UNION ENTITY SO THAT VFA HAD THEOPPORTUNITY TO SELL FINANCIAL PRODUCTS AND SERVICES TO THE K-12 TEACHERS THAT THE TEACHERS UNION ENTITY HAD ACCESS TO. VFAALSO NEVER DISCLOSED TO ITS K-12 ADVISORY CLIENTS THAT THE MBCSWHO REFERRED THEM TO VFA WERE VALIC EMPLOYEES. THE K-12TEACHERS THEREFORE DID NOT KNOW THAT THE TEACHERS UNIONENTITY OR THE MBCS HAD AN INCENTIVE TO REFER THEM TO VFA. VFAALSO FAILED TO ADOPT AND IMPLEMENT POLICIES AND PROCEDURESREASONABLY DESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACTAND THE RULES THEREUNDER.







THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED PURSUANT TO SECTION 15(B) OF THESECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AND SECTIONS203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940("ADVISERS ACT"), AGAINST VALIC FINANCIAL ADVISORS, INC. ("VFA" OR "RESPONDENT"). THE COMMISSION FINDS THAT FROM OCTOBER 2006 TOLATE 2019, VFA FAILED TO DISCLOSE TO CERTAIN FLORIDA TEACHERSWHO WERE POTENTIAL AND ACTUAL CLIENTS THAT VFA'S PARENT, THEVARIABLE ANNUITY LIFE INSURANCE COMPANY, DOING BUSINESS UNDERTHE AIG RETIREMENT SERVICES, INC. BRAND ("VALIC"), WAS PROVIDINGCASH AND OTHER FINANCIAL BENEFITS TO A FOR-PROFIT COMPANYOWNED BY FLORIDA K-12 TEACHERS' UNIONS. THAT COMPANY (THE "TEACHERS UNION ENTITY") RECEIVED CASH AND OTHER FINANCIALBENEFITS IN EXCHANGE FOR REFERRING TEACHERS TO VALIC'S ANDVFA'S PRODUCTS AND SERVICES. SPECIFICALLY, VFA RECEIVED THEFOLLOWING BENEFITS FROM THIS FINANCIAL ARRANGEMENT: (1) THETEACHERS UNION ENTITY MADE VFA ITS PREFERRED FINANCIALSERVICES PARTNER FOR MEMBERS, WHO WERE ALL FLORIDA PUBLICSCHOOL K-12 TEACHERS AND OTHER PUBLIC EDUCATION EMPLOYEES("K-12 TEACHERS"), (2) VFA WAS GIVEN INCREASED OPPORTUNITIES TOSELL ITS INVESTMENT PRODUCTS AND SERVICES TO K-12 TEACHERS NOTAFFORDED OTHER ADVISERS, AND (3) THREE FULL-TIME VALICEMPLOYEES, CALLED MEMBER BENEFIT COORDINATORS ("MBCS"), WEREDECEPTIVELY IDENTIFIED AS THE TEACHERS UNION ENTITY'SEMPLOYEES, INSTEAD OF AS VALIC EMPLOYEES, AT VARIOUSRETIREMENT PLANNING SEMINARS AND BENEFIT EVENTS ATTENDED BYK-12 TEACHERS AND REFERRED K-12 TEACHERS TO VFA FORINVESTMENT ADVISORY SERVICES. VFA'S CONDUCT CONSTITUTED ACOURSE OF BUSINESS WHICH OPERATED AS A FRAUD OR DECEIT UPONCLIENTS AND PROSPECTIVE CLIENTS, AND AS A RESULT, VFA VIOLATEDSECTIONS 206(2) AND SECTION 206(4) OF THE INVESTMENT ADVISERS ACTOF 1940, AND RULES 206(4)-3 AND 206(4)-7 THEREUNDER. DURING THETIME PERIOD THE TEACHERS UNION ENTITY AND THE MBCS REFERRED K-12 TEACHERS TO VFA, VFA EARNED MILLIONS OF DOLLARS IN FEES FROMTHE INVESTMENT PRODUCTS IT SOLD TO K-12 TEACHERS. AT NO TIMEDURING THE RELATIONSHIP BETWEEN THE TEACHERS UNION ENTITY ANDVALIC, WERE THE K-12 TEACHERS TOLD THAT VALIC WAS MAKINGPAYMENTS TO THE TEACHERS UNION ENTITY SO THAT VFA HAD THEOPPORTUNITY TO SELL FINANCIAL PRODUCTS AND SERVICES TO THE K-12 TEACHERS THAT THE TEACHERS UNION ENTITY HAD ACCESS TO. VFAALSO NEVER DISCLOSED TO ITS K-12 ADVISORY CLIENTS THAT THE MBCSWHO REFERRED THEM TO VFA WERE VALIC EMPLOYEES. THE K-12TEACHERS THEREFORE DID NOT KNOW THAT THE TEACHERS UNIONENTITY OR THE MBCS HAD AN INCENTIVE TO REFER THEM TO VFA. VFAALSO FAILED TO ADOPT AND IMPLEMENT POLICIES AND PROCEDURESREASONABLY DESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACTAND THE RULES THEREUNDER.






Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Cease and Desist




Principal Product Type: Other

Other Product Type(s): UNSPECIFIED SECURITIES

THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS ITAPPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLICADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, ANDHEREBY ARE, INSTITUTED PURSUANT TO SECTION 15(B) OF THESECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AND SECTIONS203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940("ADVISERS ACT"), AGAINST VALIC FINANCIAL ADVISORS, INC. ("VFA" OR "RESPONDENT"). THE COMMISSION FINDS THAT FROM OCTOBER 2006 TOLATE 2019, VFA FAILED TO DISCLOSE TO CERTAIN FLORIDA TEACHERSWHO WERE POTENTIAL AND ACTUAL CLIENTS THAT VFA'S PARENT, THEVARIABLE ANNUITY LIFE INSURANCE COMPANY, DOING BUSINESS UNDERTHE AIG RETIREMENT SERVICES, INC. BRAND ("VALIC"), WAS PROVIDINGCASH AND OTHER FINANCIAL BENEFITS TO A FOR-PROFIT COMPANYOWNED BY FLORIDA K-12 TEACHERS' UNIONS. THAT COMPANY (THE "TEACHERS UNION ENTITY") RECEIVED CASH AND OTHER FINANCIALBENEFITS IN EXCHANGE FOR REFERRING TEACHERS TO VALIC'S ANDVFA'S PRODUCTS AND SERVICES. SPECIFICALLY, VFA RECEIVED THEFOLLOWING BENEFITS FROM THIS FINANCIAL ARRANGEMENT: (1) THETEACHERS UNION ENTITY MADE VFA ITS PREFERRED FINANCIALSERVICES PARTNER FOR MEMBERS, WHO WERE ALL FLORIDA PUBLICSCHOOL K-12 TEACHERS AND OTHER PUBLIC EDUCATION EMPLOYEES("K-12 TEACHERS"), (2) VFA WAS GIVEN INCREASED OPPORTUNITIES TOSELL ITS INVESTMENT PRODUCTS AND SERVICES TO K-12 TEACHERS NOTAFFORDED OTHER ADVISERS, AND (3) THREE FULL-TIME VALICEMPLOYEES, CALLED MEMBER BENEFIT COORDINATORS ("MBCS"), WEREDECEPTIVELY IDENTIFIED AS THE TEACHERS UNION ENTITY'SEMPLOYEES, INSTEAD OF AS VALIC EMPLOYEES, AT VARIOUSRETIREMENT PLANNING SEMINARS AND BENEFIT EVENTS ATTENDED BYK-12 TEACHERS AND REFERRED K-12 TEACHERS TO VFA FORINVESTMENT ADVISORY SERVICES. VFA'S CONDUCT CONSTITUTED ACOURSE OF BUSINESS WHICH OPERATED AS A FRAUD OR DECEIT UPONCLIENTS AND PROSPECTIVE CLIENTS, AND AS A RESULT, VFA VIOLATEDSECTIONS 206(2) AND SECTION 206(4) OF THE INVESTMENT ADVISERS ACTOF 1940, AND RULES 206(4)-3 AND 206(4)-7 THEREUNDER. DURING THETIME PERIOD THE TEACHERS UNION ENTITY AND THE MBCS REFERRED K-12 TEACHERS TO VFA, VFA EARNED MILLIONS OF DOLLARS IN FEES FROMTHE INVESTMENT PRODUCTS IT SOLD TO K-12 TEACHERS. AT NO TIMEDURING THE RELATIONSHIP BETWEEN THE TEACHERS UNION ENTITY ANDVALIC, WERE THE K-12 TEACHERS TOLD THAT VALIC WAS MAKINGPAYMENTS TO THE TEACHERS UNION ENTITY SO THAT VFA HAD THEOPPORTUNITY TO SELL FINANCIAL PRODUCTS AND SERVICES TO THE K-12 TEACHERS THAT THE TEACHERS UNION ENTITY HAD ACCESS TO. VFAALSO NEVER DISCLOSED TO ITS K-12 ADVISORY CLIENTS THAT THE MBCSWHO REFERRED THEM TO VFA WERE VALIC EMPLOYEES. THE K-12TEACHERS THEREFORE DID NOT KNOW THAT THE TEACHERS UNIONENTITY OR THE MBCS HAD AN INCENTIVE TO REFER THEM TO VFA. VFAALSO FAILED TO ADOPT AND IMPLEMENT POLICIES AND PROCEDURESREASONABLY DESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACTAND THE RULES THEREUNDER.


Resolution:

Other Sanctions Ordered: UNDERTAKINGS

Sanction Details: THE FIRM WAS CENSURED, FINED $20,000,000, ORDERED TO CEASE ANDDESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANYFUTURE VIOLATIONS OF SECTIONS 206(2) AND 206(4) OF THE ADVISERSACT AND RULES 206(4)-3 AND 206(4)-7 PROMULGATED THEREUNDER, ANDORDERED TO COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THEORDER.

Regulator Statement RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE OFFER)WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. AS A RESULT OFITS CONDUCT, THE FIRM WILLFULLY VIOLATED SECTIONS 206(2) AND206(4)OF THE ADVISERS ACT, AND RULES 206(4)-3 AND RULE 206(4)-7THEREUNDER. ACCORDINGLY, IT IS HEREBY ORDERED THAT THE FIRM ISCENSURED, FINED $20,000,000, ORDERED TO CEASE AND DESIST FROMCOMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONSOF SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULES 206(4)-3 AND 206(4)-7 PROMULGATED THEREUNDER, AND ORDERED TO COMPLYWITH THE UNDERTAKINGS ENUMERATED IN THE ORDER.


Yes

Sanctions Ordered: CensureMonetary/Fine $20,000,000.00Cease and Desist/Injunction

Order







Initiated By: SECURITIES & EXCHANGE COMMISSION


Cease and Desist


CENSURE, CIVIL PENALTY, UNDERTAKINGS


Docket/Case Number: ADMINISTRATIVE PROCEEDING FILE NO. 3-19894

Principal Product Type: Annuity(ies) - Fixed

Other Product Type(s): ANNUITY(IES) - VARIABLE

Allegations: ON JULY 28, 2020, THE UNITED STATES SECURITIES AND EXCHANGECOMMISSION ("SEC") ISSUED AN ADMINISTRATIVE ORDER AGAINST VALICFINANCIAL ADVISORS, INC. ("VFA" OR THE "FIRM") FINDING THAT THE FIRMFAILED TO DISCLOSE TO CERTAIN FLORIDA TEACHERS THAT THE FIRM'SPARENT COMPANY, VALIC, PROVIDED CASH AND OTHER FINANCIALBENEFITS TO A FOR-PROFIT COMPANY OWNED BY FLORIDA K-12TEACHERS' UNIONS IN EXCHANGE FOR REFERRING TEACHERS TOPRODUCTS AND SERVICES OFFERED BY VALIC AND THE FIRM, INVIOLATION OF SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT ANDADVISERS ACT RULE 206(4)-3 THEREUNDER. THE SEC ALSO FOUND THATVFA DID NOT ADOPT AND IMPLEMENT WRITTEN COMPLIANCE POLICIESAND PROCEDURES REASONABLY DESIGNED TO PREVENT VIOLATIONS OFTHE ADVISERS ACT AND THE RULES THEREUNDER, IN VIOLATION OFSECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER.VFA NEITHER ADMITTED NOR DENIED THE SEC'S FINDINGS.



Resolution:

Other Sanctions Ordered: VFA ALSO AGREED TO CAP THE MANAGEMENT FEE FOR THE GPSPROGRAM AT 45 BASIS POINTS (0.45%) FOR PARTICIPANTS CURRENTLYENROLLED IN THIS PROGRAM IN 403(B) AND 457(B) PLANS OFFERED BYFLORIDA K-12 SCHOOLS, AND TO ALSO OFFER THIS RATE TO ANY 403(B)AND 457(B) PARTICIPANTS OFFERED BY FLORIDA K-12 SCHOOLS WHOENROLL IN THE GPS PROGRAM THROUGH THE PORTFOLIO DIRECTORANNUITY WITHIN THE NEXT FIVE YEARS. THIS CAPPED RATE WILL REMAININ EFFECT FOR SUCH PARTICIPANTS FOR THE DURATION OFENROLLMENT IN THE GPS PROGRAM. VFA ALSO AGREED TO COMPLYWITH CERTAIN OTHER RELATED UNDERTAKINGS AS WELL.

Sanctions Ordered: CensureMonetary/Fine $20,000,000.00Cease and Desist/Injunction

Settled





www.finra.org/brokercheck User GuidanceVFA ALSO AGREED TO CAP THE MANAGEMENT FEE FOR THE GPSPROGRAM AT 45 BASIS POINTS (0.45%) FOR PARTICIPANTS CURRENTLYENROLLED IN THIS PROGRAM IN 403(B) AND 457(B) PLANS OFFERED BYFLORIDA K-12 SCHOOLS, AND TO ALSO OFFER THIS RATE TO ANY 403(B)AND 457(B) PARTICIPANTS OFFERED BY FLORIDA K-12 SCHOOLS WHOENROLL IN THE GPS PROGRAM THROUGH THE PORTFOLIO DIRECTORANNUITY WITHIN THE NEXT FIVE YEARS. THIS CAPPED RATE WILL REMAININ EFFECT FOR SUCH PARTICIPANTS FOR THE DURATION OFENROLLMENT IN THE GPS PROGRAM. VFA ALSO AGREED TO COMPLYWITH CERTAIN OTHER RELATED UNDERTAKINGS AS WELL.

Sanction Details: SOLELY FOR THE PURPOSE OF SETTLING THE PROCEEDING, VFACONSENTED TO A CEASE-AND-DESIST ORDER, A CENSURE, AND TO PAY ACIVIL MONETARY PENALTY OF $20 MILLION, WHICH WAS PAID ON JULY 31,2020.

Firm Statement THE ALLEGATIONS, DISPOSITIONS, FINDINGS AND SANCTIONS OF THEORDER ARE DESCRIBED ABOVE IN ITEMS 7 AND 12.

Disclosure 3 of 14

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Reporting Source: Firm

Initiated By: STATE OF WASHINGTON OFFICE OF THE INSURANCE COMMISSIONER


Civil and Administrative Penalt(ies) /Fine(s)




Principal Product Type: No Product


Allegations: DUE TO AN ADMINISTRATIVE ERROR, VFA'S WASHINGTON BUSINESSENTITY LICENSE LISTED AN INVALID EMAIL ADDRESS. THE STATE USEDTHAT CONTACT INFORMATION TO SEND CORRESPONDENCE WHICHULTIMATELY WAS NOT RECEIVED BY VFA. THE STATE ISSUED ANADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF $250 FOR FAILURETO HAVE AT LEAST ONE LICENSED AFFILIATE AND FAILURE TO RESPONDTO THOSE INQUIRIES.



Resolution:

Other Sanctions Ordered:

Sanction Details: VFA SIGNED THE AGREED FINAL ORDER AND PAID THE FINE TOTALING$250.00.

Sanctions Ordered: Monetary/Fine $250.00

Order







Firm Statement VFA PAID THE FINE ISSUED BY THE STATE.

Disclosure 4 of 14

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Initiated By: HAWAII





Docket/Case Number: SEU-2018-001

URL for Regulatory Action:

Principal Product Type: Annuity(ies) - Variable


Allegations: AGENT OF FIRM PRESENTED CLIENT WITH BLANK FORM ANDCONSEQUENTLY, AGENT OF FIRM ENGAGED IN AN UNAUTHORIZEDTRANSACTION.



Resolution:


Sanction Details: FIRM PAID PENALTY OF $10,000.00 VIA WIRE TRANSFER ON 6/5/19.

Regulator Statement COMPLAINANT SUBMITTED ALLEGATIONS OF AN UNAUTHORIZEDTRANSACTION, UNWORTHINESS AND UNSUITABLE RECOMMENDATIONS.AN INVESTIGATION DETERMINED THAT THE FIRM'S AGENT ENGAGED IN ANUNAUTHORIZED TRANSACTION WITH CLIENT. A CONSENT ORDER WASISSUED, WITH STIPULATIONS & CONSENT TO ENTRY OF ORDER, ANDPAYMENT OF $10,000.00 PENALTY.


No

Sanctions Ordered: Monetary/Fine $10,000.00

Order






COMPLAINANT SUBMITTED ALLEGATIONS OF AN UNAUTHORIZEDTRANSACTION, UNWORTHINESS AND UNSUITABLE RECOMMENDATIONS.AN INVESTIGATION DETERMINED THAT THE FIRM'S AGENT ENGAGED IN ANUNAUTHORIZED TRANSACTION WITH CLIENT. A CONSENT ORDER WASISSUED, WITH STIPULATIONS & CONSENT TO ENTRY OF ORDER, ANDPAYMENT OF $10,000.00 PENALTY.


Initiated By: STATE OF HAWAII DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS





Docket/Case Number: SEU-2018-001



Allegations: ON JUNE 3, 2019, THE FIRM, WITHOUT ADMITTING OR DENYING ANYFINDINGS OF FACT OR CONCLUSIONS OF LAW, SETTLED A MATTER WITHTHE SECURITIES ENFORCEMENT BRANCH ("SEB") OF THE HAWAIIDEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS. AS PART OF THESETTLEMENT, THE FIRM ENTERED INTO A CONSENT ORDER WITH THESEB (THE "CONSENT ORDER"), WHICH STATES THAT THE FIRM FAILED TOSUPERVISE A REGISTERED REPRESENTATIVE WHO HAD SUBMITTED ATRANSACTION WITHOUT PROPER CUSTOMER AUTHORIZATION.PURSUANT TO THE CONSENT ORDER, THE FIRM PAID A FINE OF $10,000.



Resolution:


Sanction Details: ON JUNE 3, 2019, THE FIRM, WITHOUT ADMITTING OR DENYING ANYFINDINGS OF FACT OR CONCLUSIONS OF LAW, SETTLED A MATTER WITHTHE SECURITIES ENFORCEMENT BRANCH ("SEB") OF THE HAWAIIDEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS. AS PART OF THESETTLEMENT, THE FIRM ENTERED INTO A CONSENT ORDER WITH THESEB (THE "CONSENT ORDER"), WHICH STATES THAT THE FIRM FAILED TOSUPERVISE A REGISTERED REPRESENTATIVE WHO HAD SUBMITTED ATRANSACTION WITHOUT PROPER CUSTOMER AUTHORIZATION.PURSUANT TO THE CONSENT ORDER, THE FIRM PAID A FINE OF $10,000.

Sanctions Ordered: Monetary/Fine $10,000.00Cease and Desist/Injunction

Acceptance, Waiver & Consent(AWC)






ON JUNE 3, 2019, THE FIRM, WITHOUT ADMITTING OR DENYING ANYFINDINGS OF FACT OR CONCLUSIONS OF LAW, SETTLED A MATTER WITHTHE SECURITIES ENFORCEMENT BRANCH ("SEB") OF THE HAWAIIDEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS. AS PART OF THESETTLEMENT, THE FIRM ENTERED INTO A CONSENT ORDER WITH THESEB (THE "CONSENT ORDER"), WHICH STATES THAT THE FIRM FAILED TOSUPERVISE A REGISTERED REPRESENTATIVE WHO HAD SUBMITTED ATRANSACTION WITHOUT PROPER CUSTOMER AUTHORIZATION.PURSUANT TO THE CONSENT ORDER, THE FIRM PAID A FINE OF $10,000.

Firm Statement ON JUNE 3, 2019, THE FIRM, WITHOUT ADMITTING OR DENYING ANYFINDINGS OF FACT OR CONCLUSIONS OF LAW, SETTLED A MATTER WITHTHE SECURITIES ENFORCEMENT BRANCH ("SEB") OF THE HAWAIIDEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS. AS PART OF THESETTLEMENT, THE FIRM ENTERED INTO A CONSENT ORDER WITH THESEB (THE "CONSENT ORDER"), WHICH STATES THAT THE FIRM FAILED TOSUPERVISE A REGISTERED REPRESENTATIVE WHO HAD SUBMITTED ATRANSACTION WITHOUT PROPER CUSTOMER AUTHORIZATION.PURSUANT TO THE CONSENT ORDER, THE FIRM PAID A FINE OF $10,000.

Disclosure 5 of 14

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Initiated By: TENNESSEE DIVISION OF INSURANCE





Docket/Case Number: 12.04-149432J



Allegations: ON 04/06/2016, VALIC FINANCIAL ADVISORS, INC. (VFA) FILED ANINSURANCE AGENCY APPLICATION IN THE STATE OF TENNESSEE. DUE TOAN ADMINISTRATIVE ERROR, THE APPLICATION FAILED TO INCLUDECERTAIN VFA REGULATORY DISCLOSURES. UPON RECOGNIZING THEERROR, VFA AMENDED ITS INSURANCE AGENCY APPLICATION ON9/30/2017. ON 01/31/2018 THE STATE OF TENNESSEE INSURANCE DIVISIONISSUED A CIVIL PENALTY AGAINST VFA IN THE AMOUNT OF $500.00 FORFAILING TO INCLUDE THE REGULATORY DISCLOSURES IN THE INITIALAPPLICATION.



Resolution:



Order









Disclosure 6 of 14

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Initiated By: STATE OF OHIO DEPARTMENT OF INSURANCE





Docket/Case Number:

Principal Product Type: Insurance


Allegations: ON APRIL 6, 2016, VALIC FINANCIAL ADVISORS, INC. (VFA) FILED ANINSURANCE AGENCY APPLICATION ON BEHALF IN THE STATE OF OHIO.DUE TO AN ADMINISTRATIVE ERROR, THE APPLICATION FAILED TOINCLUDE CERTAIN VFA REGULATORY DISCLOSURES. UPON RECOGNIZINGTHE ERROR, VFA AMENDED ITS INSURANCE AGENCY APPLICATION ONSEPTEMBER 30. ON MAY 23, THE OHIO DEPARTMENT OF INSURANCEISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF $500FOR INADVERTENTLY OMITTING REGULATORY DISCLOSURE IN THEINITIAL APPLICATION. THE ADMINISTRATIVE FINE INVOICE WAS RECEIVEDBY VFA ON JUNE 26, 2017, AT WHICH TIME IT WAS PROMPTLY PAID.



Resolution:


Sanction Details: FINE OF $500 WAS ISSUED BY THE STATE. VFA MAILED A CHECK TO THEOHIO DEPT. OF INSURANCE ON OR ABOUT JUNE 28, 2017. FINE WAS PAIDIN FULL.



Consent







Disclosure 7 of 14

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Initiated By: STATE OF MAINE BUREAU OF INSURANCE





Docket/Case Number: AGN266722



Allegations: ON APRIL 6, 2016, VALIC FINANCIAL ADVISORS, INC. (VFA) FILED ANINSURANCE AGENCY APPLICATION ON BEHALF IN THE STATE OF MAINE.DUE TO AN ADMINISTRATIVE ERROR, THE APPLICATION FAILED TOINCLUDE CERTAIN VFA REGULATORY DISCLOSURES. UPON RECOGNIZINGTHE ERROR, VFA AMENDED ITS INSURANCE AGENCY APPLICATION ONSEPTEMBER 30. ON JANUARY 23, THE STATE OF MAINE BUREAU OFINSURANCE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THEAMOUNT OF $50 FOR FAILING TO INCLUDE THE REGULATORYDISCLOSURES IN THE INITIAL APPLICATION. THE CORRESPONDENCE WASNOT RECEIVED BY VFA UNTIL MARCH 22, AT WHICH TIME PAYMENT OF THEFEE WAS ARRANGED.



Resolution:


Sanction Details: VFA PAID THE $50 FINE ISSUED BY THE STATE ON 4/7/2017.



Settled

Disclosure 8 of 14

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Initiated By: STATE OF OKLAHOMA INSURANCE DEPARTMENT





Docket/Case Number: 16-0572-DEN



Allegations: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION ONBEHALF OF VFA IN THE STATE OF OKLAHOMA. DUE TO ANADMINISTRATIVE ERROR, THE APPLICATION OMITTED CERTAIN FINRAREGULATORY ACTIONS. VFA AMENDED ITS APPLICATION ON JUNE 3. ON,JUNE 14, THE STATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA INTHE AMOUNT OF $300 FOR OMITTING THE REGULATORY EVENT IN ITSAPPLICATION.



Resolution:


Sanction Details: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION ONBEHALF OF VFA IN THE STATE OF OKLAHOMA. DUE TO ANADMINISTRATIVE ERROR, THE APPLICATION OMITTED CERTAIN FINRAREGULATORY ACTIONS. VFA AMENDED ITS APPLICATION ON JUNE 3. ON,JUNE 14, THE STATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA INTHE AMOUNT OF $300 FOR OMITTING THE REGULATORY EVENT IN ITSAPPLICATION.

Firm Statement VFA AGREED TO SETTLEMENT AND PAID $300 ADMINISTRATIVE FINE.


Settled

Disclosure 9 of 14

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Allegations: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF ALASKA. VFA AMENDED ITS APPLICATION ON SEPT 30, 2016 TODISCLOSE A FINE ISSUED BY THE OKLAHOMA INSURANCE DEPARTMENT.ON OCTOBER 7, ALASKA ISSUED AN ADMINISTRATIVE FINE AGAINST VFA INTHE AMOUNT OF $100 FOR FAILING TO TIMELY REPORT THE FINE ISSUEDBY THE STATE OF OKLAHOMA.







Initiated By: ALASKA DIVISION OF INSURANCE





Docket/Case Number: 100130340



ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF ALASKA. VFA AMENDED ITS APPLICATION ON SEPT 30, 2016 TODISCLOSE A FINE ISSUED BY THE OKLAHOMA INSURANCE DEPARTMENT.ON OCTOBER 7, ALASKA ISSUED AN ADMINISTRATIVE FINE AGAINST VFA INTHE AMOUNT OF $100 FOR FAILING TO TIMELY REPORT THE FINE ISSUEDBY THE STATE OF OKLAHOMA.


Resolution:


Sanction Details: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF ALASKA. VFA AMENDED ITS APPLICATION ON SEPT 30, 2016 TODISCLOSE A FINE ISSUED BY THE OKLAHOMA INSURANCE DEPARTMENT.ON OCTOBER 7, ALASKA ISSUED AN ADMINISTRATIVE FINE AGAINST VFA INTHE AMOUNT OF $100 FOR FAILING TO TIMELY REPORT THE FINE ISSUEDBY THE STATE OF OKLAHOMA.

Firm Statement VFA SETTLED THE MATTER AND PAID THE $100 FINE.


Settled

Disclosure 10 of 14

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Allegations: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF LOUISIANA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY EVENTS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON NOVEMBER 7, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$500 FOR OMITTING PRIOR REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.







Initiated By: LOUISIANA DEPARTMENT OF INSURANCE








ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF LOUISIANA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY EVENTS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON NOVEMBER 7, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$500 FOR OMITTING PRIOR REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.


Resolution:


Sanction Details: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF LOUISIANA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY EVENTS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON NOVEMBER 7, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$500 FOR OMITTING PRIOR REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.



Settled

Disclosure 11 of 14

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Initiated By: VIRGINIA BUREAU OF INSURANCE

Allegations: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF VIRGINIA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY ACTIONS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON, NOVEMBER 29, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$500 FOR OMITTING THE REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.







Initiated By: VIRGINIA BUREAU OF INSURANCE









Resolution:


Sanction Details: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF VIRGINIA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY ACTIONS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON, NOVEMBER 29, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$500 FOR OMITTING THE REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.



Settled

Disclosure 12 of 14

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Initiated By: NORTH CAROLINA DEPARTMENT OF INSURANCE


Allegations: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF NORTH CAROLINA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY EVENTS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON DECEMBER 16, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$250 FOR OMITTING THE REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.















Resolution:


Sanction Details: ON APRIL 6, 2016, VFA FILED AN INSURANCE AGENCY APPLICATION IN THESTATE OF NORTH CAROLINA. DUE TO AN ADMINISTRATIVE ERROR, THEAPPLICATION OMITTED CERTAIN FINRA REGULATORY EVENTS. VFAAMENDED ITS APPLICATION ON SEPTEMBER 30. ON DECEMBER 16, THESTATE ISSUED AN ADMINISTRATIVE FINE AGAINST VFA IN THE AMOUNT OF$250 FOR OMITTING THE REGULATORY EVENTS IN THE INITIALAPPLICATION AND FALING TO TIMELY REPORT THE FINE ISSUED BY THESTATE OF OKLAHOMA.



Settled

Disclosure 13 of 14

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Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT'SSUPERVISORY SYSTEM FAILED TO IDENTIFY AND REASONABLY ADDRESSCERTAIN CONFLICTS OF INTEREST IN THE FIRM'S COMPENSATION POLICYWHERE CUSTOMERS ELECTED TO MOVE ASSETS OUT OF THEIRRETIREMENT PLAN AND OTHER FIRM VARIABLE ANNUITIES. THE FINDINGSSTATED THAT THE FIRM'S COMPENSATION POLICY DID PROVIDE FOR THEPAYMENT OF COMPENSATION IF THOSE PROCEEDS WERE ROLLED INTOTHE FIRM'S MANAGED INVESTMENT PROGRAM, A FEE-BASEDINVESTMENT ADVISORY SERVICES PROGRAM, OR A FIXED INDEXANNUITY. AS A RESULT, THE FIRM'S COMPENSATION POLICY CREATED ACONFLICT OF INTEREST BETWEEN REGISTERED REPRESENTATIVES ANDCUSTOMERS BY GIVING REPRESENTATIVES FINANCIAL INCENTIVE TORECOMMEND THAT CERTAIN CUSTOMERS MOVE FUNDS FROM THEIRRETIREMENT PLAN TO THE FIRM'S MANAGED INVESTMENT PROGRAM, ORTO THE FIXED INDEX ANNUITY. DURING THIS TIME PERIOD, THERE WASGROWTH IN NEW BUSINESS BEING DIRECTED TO THE FIRM'S MANAGEDINVESTMENT PROGRAM AND TO THE FIXED INDEX ANNUITY. THEFINDINGS ALSO STATED THAT THE FIRM DID NOT HAVE A REASONABLESYSTEM OR PROCEDURES DESIGNED TO ADDRESS, ANALYZE OR REVIEWTHE CONFLICT OF INTEREST IN ITS COMPENSATION PROGRAM. THE FIRMALSO FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SYSTEM TOADEQUATELY SUPERVISE CERTAIN ASPECTS OF THE SALE OF INDIVIDUALVARIABLE ANNUITIES CONTRACTS. MORE SPECIFICALLY, THE FIRM'SSYSTEMS DID NOT PROVIDE PRINCIPALS REVIEWING AND APPROVINGVARIABLE ANNUITIES TRANSACTIONS SUFFICIENT INFORMATION TOCONSIDER ALL OF CUSTOMERS' EXISTING ASSETS AND HOLDINGS PRIORTO APPROVING VARIABLE ANNUITIES TRANSACTIONS. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO ENFORCE ITS EXISTINGPROCEDURES RELATING TO THE REVIEW OF REQUIRED CUSTOMERINFORMATION ON THE FIRM'S ANNUITY TRANSACTION DISCLOSUREFORM, MAKING SURE THE INFORMATION WAS COMPLETE AND ACCURATE.FINRA FOUND THAT THE FIRM ALSO FAILED TO ENFORCE ITS WRITTENSUPERVISORY PROCEDURES (WSPS) REQUIRING THAT COMPLETEINFORMATION BE SUBMITTED TO THE FIRM PRINCIPALS PRIOR TO THEPRINCIPAL APPROVING A VARIABLE ANNUITY TRANSACTION. FINRA ALSOFOUND THAT THE FIRM'S WSPS REQUIRED HEIGHTENED REVIEW OFVARIABLE ANNUITY TRANSACTIONS WHERE THE VARIABLE ANNUITY TOCUSTOMER NET WORTH RATIO EXCEEDED 35 PERCENT AND REQUIREDSPECIFIC DOCUMENTATION OF THE RATIONALE FOR APPROVAL OF SUCHCONCENTRATION, AND THE FIRM FAILED TO REASONABLY ENFORCE THISPROCEDURE. IN ADDITION, FINRA FOUND THAT THE FIRM FAILED TO HAVEWSPS OR SUPERVISORY SYSTEMS IN PLACE PROVIDING REGISTEREDREPRESENTATIVES AND SUPERVISORY PERSONNEL WITH GUIDANCERELATING TO THE SUITABILITY OF VARIABLE ANNUITIES WITH MULTIPLESHARE CLASSES. DURING THIS SAME TIME PERIOD, THE FIRM FAILED TOPROVIDE ITS REGISTERED REPRESENTATIVES AND PRINCIPALS WITHADEQUATE TRAINING AND GUIDANCE ON THE SALE OF VARIABLEANNUITIES WITH MULTIPLE SHARE CLASSES. MOREOVER, FINRA FOUNDTHAT THE FIRM FAILED TO ENFORCE ITS WSPS REQUIRING REVIEW OFEMAILS FLAGGED THROUGH THE FIRM'S EMAIL SURVEILLANCE SYSTEM.UPON DISCOVERING THIS ISSUE, THE FIRM PROMPTLY REPORTED IT TOFINRA AND SUBSEQUENTLY REVIEWED EACH FLAGGED EMAIL. ALSO, THEFIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A REASONABLESUPERVISORY PROCESS TO ENSURE THAT THE FIRM ACCURATELY ANDTIMELY REPORTED CUSTOMER COMPLAINTS IN FINRA'S 4530 COMPLAINTREPORTING SYSTEM AND ON ITS REGISTERED REPRESENTATIVES'UNIFORM APPLICATION FOR SECURITIES INDUSTRY REGISTRATION ORTRANSFER (FORMS U4) AND UNIFORM TERMINATION NOTICE FORSECURITIES INDUSTRY REGISTRATION (FORMS U5). FURTHERMORE,FINRA FOUND THAT THE FIRM FAILED TO SEND ACCOUNT NOTICES TOCERTAIN CUSTOMERS CONFIRMING CUSTOMER ACCOUNT OPENINGINFORMATION WITHIN 30 DAYS OF OPENING THE ACCOUNT AND THEN ATLEAST EVERY 36 MONTHS THEREAFTER.







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT'SSUPERVISORY SYSTEM FAILED TO IDENTIFY AND REASONABLY ADDRESSCERTAIN CONFLICTS OF INTEREST IN THE FIRM'S COMPENSATION POLICYWHERE CUSTOMERS ELECTED TO MOVE ASSETS OUT OF THEIRRETIREMENT PLAN AND OTHER FIRM VARIABLE ANNUITIES. THE FINDINGSSTATED THAT THE FIRM'S COMPENSATION POLICY DID PROVIDE FOR THEPAYMENT OF COMPENSATION IF THOSE PROCEEDS WERE ROLLED INTOTHE FIRM'S MANAGED INVESTMENT PROGRAM, A FEE-BASEDINVESTMENT ADVISORY SERVICES PROGRAM, OR A FIXED INDEXANNUITY. AS A RESULT, THE FIRM'S COMPENSATION POLICY CREATED ACONFLICT OF INTEREST BETWEEN REGISTERED REPRESENTATIVES ANDCUSTOMERS BY GIVING REPRESENTATIVES FINANCIAL INCENTIVE TORECOMMEND THAT CERTAIN CUSTOMERS MOVE FUNDS FROM THEIRRETIREMENT PLAN TO THE FIRM'S MANAGED INVESTMENT PROGRAM, ORTO THE FIXED INDEX ANNUITY. DURING THIS TIME PERIOD, THERE WASGROWTH IN NEW BUSINESS BEING DIRECTED TO THE FIRM'S MANAGEDINVESTMENT PROGRAM AND TO THE FIXED INDEX ANNUITY. THEFINDINGS ALSO STATED THAT THE FIRM DID NOT HAVE A REASONABLESYSTEM OR PROCEDURES DESIGNED TO ADDRESS, ANALYZE OR REVIEWTHE CONFLICT OF INTEREST IN ITS COMPENSATION PROGRAM. THE FIRMALSO FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SYSTEM TOADEQUATELY SUPERVISE CERTAIN ASPECTS OF THE SALE OF INDIVIDUALVARIABLE ANNUITIES CONTRACTS. MORE SPECIFICALLY, THE FIRM'SSYSTEMS DID NOT PROVIDE PRINCIPALS REVIEWING AND APPROVINGVARIABLE ANNUITIES TRANSACTIONS SUFFICIENT INFORMATION TOCONSIDER ALL OF CUSTOMERS' EXISTING ASSETS AND HOLDINGS PRIORTO APPROVING VARIABLE ANNUITIES TRANSACTIONS. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO ENFORCE ITS EXISTINGPROCEDURES RELATING TO THE REVIEW OF REQUIRED CUSTOMERINFORMATION ON THE FIRM'S ANNUITY TRANSACTION DISCLOSUREFORM, MAKING SURE THE INFORMATION WAS COMPLETE AND ACCURATE.FINRA FOUND THAT THE FIRM ALSO FAILED TO ENFORCE ITS WRITTENSUPERVISORY PROCEDURES (WSPS) REQUIRING THAT COMPLETEINFORMATION BE SUBMITTED TO THE FIRM PRINCIPALS PRIOR TO THEPRINCIPAL APPROVING A VARIABLE ANNUITY TRANSACTION. FINRA ALSOFOUND THAT THE FIRM'S WSPS REQUIRED HEIGHTENED REVIEW OFVARIABLE ANNUITY TRANSACTIONS WHERE THE VARIABLE ANNUITY TOCUSTOMER NET WORTH RATIO EXCEEDED 35 PERCENT AND REQUIREDSPECIFIC DOCUMENTATION OF THE RATIONALE FOR APPROVAL OF SUCHCONCENTRATION, AND THE FIRM FAILED TO REASONABLY ENFORCE THISPROCEDURE. IN ADDITION, FINRA FOUND THAT THE FIRM FAILED TO HAVEWSPS OR SUPERVISORY SYSTEMS IN PLACE PROVIDING REGISTEREDREPRESENTATIVES AND SUPERVISORY PERSONNEL WITH GUIDANCERELATING TO THE SUITABILITY OF VARIABLE ANNUITIES WITH MULTIPLESHARE CLASSES. DURING THIS SAME TIME PERIOD, THE FIRM FAILED TOPROVIDE ITS REGISTERED REPRESENTATIVES AND PRINCIPALS WITHADEQUATE TRAINING AND GUIDANCE ON THE SALE OF VARIABLEANNUITIES WITH MULTIPLE SHARE CLASSES. MOREOVER, FINRA FOUNDTHAT THE FIRM FAILED TO ENFORCE ITS WSPS REQUIRING REVIEW OFEMAILS FLAGGED THROUGH THE FIRM'S EMAIL SURVEILLANCE SYSTEM.UPON DISCOVERING THIS ISSUE, THE FIRM PROMPTLY REPORTED IT TOFINRA AND SUBSEQUENTLY REVIEWED EACH FLAGGED EMAIL. ALSO, THEFIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A REASONABLESUPERVISORY PROCESS TO ENSURE THAT THE FIRM ACCURATELY ANDTIMELY REPORTED CUSTOMER COMPLAINTS IN FINRA'S 4530 COMPLAINTREPORTING SYSTEM AND ON ITS REGISTERED REPRESENTATIVES'UNIFORM APPLICATION FOR SECURITIES INDUSTRY REGISTRATION ORTRANSFER (FORMS U4) AND UNIFORM TERMINATION NOTICE FORSECURITIES INDUSTRY REGISTRATION (FORMS U5). FURTHERMORE,FINRA FOUND THAT THE FIRM FAILED TO SEND ACCOUNT NOTICES TOCERTAIN CUSTOMERS CONFIRMING CUSTOMER ACCOUNT OPENINGINFORMATION WITHIN 30 DAYS OF OPENING THE ACCOUNT AND THEN ATLEAST EVERY 36 MONTHS THEREAFTER.






Initiated By: FINRA







WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT'SSUPERVISORY SYSTEM FAILED TO IDENTIFY AND REASONABLY ADDRESSCERTAIN CONFLICTS OF INTEREST IN THE FIRM'S COMPENSATION POLICYWHERE CUSTOMERS ELECTED TO MOVE ASSETS OUT OF THEIRRETIREMENT PLAN AND OTHER FIRM VARIABLE ANNUITIES. THE FINDINGSSTATED THAT THE FIRM'S COMPENSATION POLICY DID PROVIDE FOR THEPAYMENT OF COMPENSATION IF THOSE PROCEEDS WERE ROLLED INTOTHE FIRM'S MANAGED INVESTMENT PROGRAM, A FEE-BASEDINVESTMENT ADVISORY SERVICES PROGRAM, OR A FIXED INDEXANNUITY. AS A RESULT, THE FIRM'S COMPENSATION POLICY CREATED ACONFLICT OF INTEREST BETWEEN REGISTERED REPRESENTATIVES ANDCUSTOMERS BY GIVING REPRESENTATIVES FINANCIAL INCENTIVE TORECOMMEND THAT CERTAIN CUSTOMERS MOVE FUNDS FROM THEIRRETIREMENT PLAN TO THE FIRM'S MANAGED INVESTMENT PROGRAM, ORTO THE FIXED INDEX ANNUITY. DURING THIS TIME PERIOD, THERE WASGROWTH IN NEW BUSINESS BEING DIRECTED TO THE FIRM'S MANAGEDINVESTMENT PROGRAM AND TO THE FIXED INDEX ANNUITY. THEFINDINGS ALSO STATED THAT THE FIRM DID NOT HAVE A REASONABLESYSTEM OR PROCEDURES DESIGNED TO ADDRESS, ANALYZE OR REVIEWTHE CONFLICT OF INTEREST IN ITS COMPENSATION PROGRAM. THE FIRMALSO FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SYSTEM TOADEQUATELY SUPERVISE CERTAIN ASPECTS OF THE SALE OF INDIVIDUALVARIABLE ANNUITIES CONTRACTS. MORE SPECIFICALLY, THE FIRM'SSYSTEMS DID NOT PROVIDE PRINCIPALS REVIEWING AND APPROVINGVARIABLE ANNUITIES TRANSACTIONS SUFFICIENT INFORMATION TOCONSIDER ALL OF CUSTOMERS' EXISTING ASSETS AND HOLDINGS PRIORTO APPROVING VARIABLE ANNUITIES TRANSACTIONS. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO ENFORCE ITS EXISTINGPROCEDURES RELATING TO THE REVIEW OF REQUIRED CUSTOMERINFORMATION ON THE FIRM'S ANNUITY TRANSACTION DISCLOSUREFORM, MAKING SURE THE INFORMATION WAS COMPLETE AND ACCURATE.FINRA FOUND THAT THE FIRM ALSO FAILED TO ENFORCE ITS WRITTENSUPERVISORY PROCEDURES (WSPS) REQUIRING THAT COMPLETEINFORMATION BE SUBMITTED TO THE FIRM PRINCIPALS PRIOR TO THEPRINCIPAL APPROVING A VARIABLE ANNUITY TRANSACTION. FINRA ALSOFOUND THAT THE FIRM'S WSPS REQUIRED HEIGHTENED REVIEW OFVARIABLE ANNUITY TRANSACTIONS WHERE THE VARIABLE ANNUITY TOCUSTOMER NET WORTH RATIO EXCEEDED 35 PERCENT AND REQUIREDSPECIFIC DOCUMENTATION OF THE RATIONALE FOR APPROVAL OF SUCHCONCENTRATION, AND THE FIRM FAILED TO REASONABLY ENFORCE THISPROCEDURE. IN ADDITION, FINRA FOUND THAT THE FIRM FAILED TO HAVEWSPS OR SUPERVISORY SYSTEMS IN PLACE PROVIDING REGISTEREDREPRESENTATIVES AND SUPERVISORY PERSONNEL WITH GUIDANCERELATING TO THE SUITABILITY OF VARIABLE ANNUITIES WITH MULTIPLESHARE CLASSES. DURING THIS SAME TIME PERIOD, THE FIRM FAILED TOPROVIDE ITS REGISTERED REPRESENTATIVES AND PRINCIPALS WITHADEQUATE TRAINING AND GUIDANCE ON THE SALE OF VARIABLEANNUITIES WITH MULTIPLE SHARE CLASSES. MOREOVER, FINRA FOUNDTHAT THE FIRM FAILED TO ENFORCE ITS WSPS REQUIRING REVIEW OFEMAILS FLAGGED THROUGH THE FIRM'S EMAIL SURVEILLANCE SYSTEM.UPON DISCOVERING THIS ISSUE, THE FIRM PROMPTLY REPORTED IT TOFINRA AND SUBSEQUENTLY REVIEWED EACH FLAGGED EMAIL. ALSO, THEFIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A REASONABLESUPERVISORY PROCESS TO ENSURE THAT THE FIRM ACCURATELY ANDTIMELY REPORTED CUSTOMER COMPLAINTS IN FINRA'S 4530 COMPLAINTREPORTING SYSTEM AND ON ITS REGISTERED REPRESENTATIVES'UNIFORM APPLICATION FOR SECURITIES INDUSTRY REGISTRATION ORTRANSFER (FORMS U4) AND UNIFORM TERMINATION NOTICE FORSECURITIES INDUSTRY REGISTRATION (FORMS U5). FURTHERMORE,FINRA FOUND THAT THE FIRM FAILED TO SEND ACCOUNT NOTICES TOCERTAIN CUSTOMERS CONFIRMING CUSTOMER ACCOUNT OPENINGINFORMATION WITHIN 30 DAYS OF OPENING THE ACCOUNT AND THEN ATLEAST EVERY 36 MONTHS THEREAFTER.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $1,750,000. FINES PAID IN FULL ON12/5/16.


No

Sanctions Ordered: CensureMonetary/Fine $1,750,000.00



Allegations: WITHOUT ADMITTING OR DENYING THE FINANCIAL REGULATORYAUTHORITY'S (FINRA) FINDINGS, VALIC FINANCIAL ADVISORS, INC. ("FIRM")SUBMITTED TO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") FOR THE PURPOSE OF PROPOSING A SETTLEMENT OF THEALLEGED RULE VIOLATIONS DESCRIBED BELOW. FINRA ALLEGEDVIOLATIONS OF NASD RULE 3010(A)/(B) AND FINRA RULES 2010, 2330(C),(D) AND (E), 3110(A)/(B) RELATING TO ALLEGED FAILURES TO (1) HAVE AREASONABLE SYSTEM OR PROCESS/PROCEDURES DESIGNED TOADDRESS, ANALYZE OR REVIEW THE CONFLICTS OF INTEREST IN ITSCOMPENSATION PROGRAM OR TO ENSURE THAT BALANCEDDISCLOSURES WAS PROVIDED TO THE INVESTORS REGARDING SUCHCOMPENSATION PROGRAM, (2) TO MAINTAIN ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SALE OF VARIABLE ANNUITIES TORETAIL BROKERAGE CUSTOMERS, (3) MAINTAIN SUPERVISORYPROCEDURES AND TRAINING MATERIALS THAT PROVIDE REGISTEREDREPRESENTATIVES AND PRINCIPALS GUIDANCE OR SUITABILITYCONSIDERATIONS FOR SALES OF DIFFERENT VARIABLE ANNUITY SHARECLASSES, INCLUDING L-SHARE VARIABLE ANNUITIES, (4) ENFORCESUPERVISORY PROCEDURES REQUIRING THE THAT CERTAIN EMAILSFLAGGED BY ITS EMAIL SURVEILLANCE SYSTEM BE REVIEWED BYDESIGNATED FIRM SUPERVISORS, (5) ESTABLISH A REASONABLE SYSTEMAND PROCEDURES TO SUPERVISE ITS COMPLAINT REPORTINGRESPONSIBILITIES (ALLEGED VIOLATION OF FINRA RULES 4530, 1122 AND2010 AND FINRA BY-LAWS ARTICLE V, SECTION 2 AND 3), AND (6) FAILED TOISSUE ACCOUNT NOTICES AT ACCOUNT OPENING AND THEN ON 36-MONTH INTERVALS FOR CERTAIN BROKERAGE CUSTOMERS (ALLEGEDVIOLATIONS OF SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF1934 AND RULE 17A-3(A)(17)(I)(B)(1) THEREUNDER, NASD RULES 3110 AND2110, AND FINRA RULES 4511 AND 2010).






https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=2014042360001


Initiated By: FINANCIAL INDUSTRY REGULATORY AUTHORITY


Censure


FINE: $1,750,000





WITHOUT ADMITTING OR DENYING THE FINANCIAL REGULATORYAUTHORITY'S (FINRA) FINDINGS, VALIC FINANCIAL ADVISORS, INC. ("FIRM")SUBMITTED TO A LETTER OF ACCEPTANCE, WAIVER AND CONSENT("AWC") FOR THE PURPOSE OF PROPOSING A SETTLEMENT OF THEALLEGED RULE VIOLATIONS DESCRIBED BELOW. FINRA ALLEGEDVIOLATIONS OF NASD RULE 3010(A)/(B) AND FINRA RULES 2010, 2330(C),(D) AND (E), 3110(A)/(B) RELATING TO ALLEGED FAILURES TO (1) HAVE AREASONABLE SYSTEM OR PROCESS/PROCEDURES DESIGNED TOADDRESS, ANALYZE OR REVIEW THE CONFLICTS OF INTEREST IN ITSCOMPENSATION PROGRAM OR TO ENSURE THAT BALANCEDDISCLOSURES WAS PROVIDED TO THE INVESTORS REGARDING SUCHCOMPENSATION PROGRAM, (2) TO MAINTAIN ADEQUATE SYSTEMS ANDPROCEDURES TO SUPERVISE THE SALE OF VARIABLE ANNUITIES TORETAIL BROKERAGE CUSTOMERS, (3) MAINTAIN SUPERVISORYPROCEDURES AND TRAINING MATERIALS THAT PROVIDE REGISTEREDREPRESENTATIVES AND PRINCIPALS GUIDANCE OR SUITABILITYCONSIDERATIONS FOR SALES OF DIFFERENT VARIABLE ANNUITY SHARECLASSES, INCLUDING L-SHARE VARIABLE ANNUITIES, (4) ENFORCESUPERVISORY PROCEDURES REQUIRING THE THAT CERTAIN EMAILSFLAGGED BY ITS EMAIL SURVEILLANCE SYSTEM BE REVIEWED BYDESIGNATED FIRM SUPERVISORS, (5) ESTABLISH A REASONABLE SYSTEMAND PROCEDURES TO SUPERVISE ITS COMPLAINT REPORTINGRESPONSIBILITIES (ALLEGED VIOLATION OF FINRA RULES 4530, 1122 AND2010 AND FINRA BY-LAWS ARTICLE V, SECTION 2 AND 3), AND (6) FAILED TOISSUE ACCOUNT NOTICES AT ACCOUNT OPENING AND THEN ON 36-MONTH INTERVALS FOR CERTAIN BROKERAGE CUSTOMERS (ALLEGEDVIOLATIONS OF SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF1934 AND RULE 17A-3(A)(17)(I)(B)(1) THEREUNDER, NASD RULES 3110 AND2110, AND FINRA RULES 4511 AND 2010).


Resolution:


Sanctions Ordered: CensureMonetary/Fine $1,750,000.00






https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=2014042360001



Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, VALIC FINANCIALADVISORS, INC. CONSENTED TO THE DESCRIBED SANCTIONS AND TO THEENTRY OF FINDINGS. THEREFORE, THE FIRM WAS CENSURED AND FINED$1,750,000.

Disclosure 14 of 14

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Initiated By: FINRA




Docket/Case Number: E062005009701



Allegations: NASD RULES 2110, 2830(K), 3010, 3070 - RESPONDENT MEMBER VIOLATEDTHE DIRECTED BROKERAGE PROVISIONS BY ACCEPTING DIRECTEDBROKERAGE COMMISSIONS IN EXCHANGE FOR PROVIDING A MUTUALFUND COMPANY WITH PREFERRED ACCESS TO ITS SALE FORCE. THEFINDINGS STATED THAT THE FIRM FAILED TO REPORT, OR TO TIMELYREPORT, DISCLOSURE EVENTS PURSUANT TO NASD RULE 3070. THEFINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAINAND ENFORCE A SYSTEM AND PROCEDURES REASONABLY DESIGNED TOACHIEVE COMPLIANCE WITH FEDERAL SECURITIES LAWS AND NASD RULE3070 REPORTING REQUIREMENTS.



Resolution:


No

Sanctions Ordered: CensureMonetary/Fine $250,000.00






https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=E062005009701



Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, VALIC FINANCIALADVISORS, INC., CONSENTED TO THE DESCRIBED SANCTIONS AND TOTHE ENTRY OF FINDINGS, THEREFORE, THE FIRM WAS CENSURED ANDFINED $250,000.



Initiated By: FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA)


Censure


MONETARY FINE IN THE AMOUNT OF $250,000.00


Docket/Case Number: E062005009701



Allegations: RECEIPT OF DIRECTED BROKERAGE COMMISSIONS, RULE 3070VIOLATION, SUPERVISORY VIOLATION.



Resolution:


Sanction Details: TO RESOLVE THIS MATTER, RESPONDENT HAS AGREED TO A MONETARYFINE IN THE AMOUNT OF $250,000.00 WHICH WILL BE MADE PAYABLE BYCHECK FOR THE FULL AMOUNT UPON NOTICE THAT THE LETTER OFACCEPTANCE WAIVER AND CONSENT (LWC) HAS BEEN ACCEPTED ANDTHAT SUCH PAYMENT IS DUE AND PAYABLE.

Firm Statement THE MATTER HAS BEEN SETTLED.







https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=E062005009701


Arbitration Award - Award / Judgment

Brokerage firms are not required to report arbitration claims filed against them by customers; however, BrokerCheckprovides summary information regarding FINRA arbitration awards involving securities and commodities disputesbetween public customers and registered securities firms in this section of the report. The full text of arbitration awards issued by FINRA is available at www.finra.org/awardsonline.

Disclosure 1 of 3


Type of Event: ARBITRATION

Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

Disputed Product Type:

Sum of All Relief Requested:

Disposition:

Disposition Date:

Sum of All Relief Awarded:

FINRA

01/17/2014

14-00096

$500,000.00

AWARD AGAINST PARTY

03/20/2015

$667,422.00

There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.

Disclosure 2 of 3

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



FINRA

06/17/2016

16-01609

ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSIONOF FACTS; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-FAILURETO SUPERVISE

VARIABLE ANNUITIES

$8,000.0047©2020 FINRA. All rights reserved. Report about VALIC FINANCIAL ADVISORS, INC.




www.finra.org/awardsonline

https://www.finra.org/arbitration-mediation/arbitration-awards-online?search=14-00096




Disposition:

Disposition Date:


$8,000.00

AWARD AGAINST PARTY

12/06/2016

$6,000.00


Disclosure 3 of 3

i



Arbitration Forum:

Case Initiated:

Case Number:

Allegations:



Disposition:

Disposition Date:


FINRA

08/21/2018

18-02838

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-OMISSION OF FACTS; ACCOUNT ACTIVITY-OTHER; ACCOUNT RELATED-ERRORS-CHARGES

MUTUAL FUNDS

$19,554.28

AWARD AGAINST PARTY

12/31/2018

$9,291.15








End of Report

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