| Recently, the NYS Department of Financial Services informed Big I NY and other producer associations that it has begun an aggressive investigation into alleged churning of National Security Life and Annuity Company (NSLAC) life insurance and annuities products. NSLAC is the NY subsidiary of Ohio National.
In September of 2018, Ohio National informed broker-dealers that sell its variable annuities that it will terminate servicing agreements and cut off trail commissions by mid-December. In response, multiple advisers and broker-dealers have sued Ohio National alleging unjust enrichment and unlawful conduct. The DFS advised producer groups that it has observed evidence that some producers are advising their clients to surrender or replace their policies as a result of the elimination of trail commissions on NSLAC. This constitutes churning/twisting, and is a violation of New York Law. The Department is currently reviewing all surrender and replacements of NSLAC products for evidence of improper conduct by producers. They have instituted a “zero tolerance" policy, and will punish churning/twisting with heavy fines and/or license suspension.
Contact Tim Dodge or Scott Hobson with questions.
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