According to FINRA, AAG Capital, Inc. was censured, fined $100,000, and ordered to pay $38,591.39 plus interest in restitution to customers for failing to adequately supervise recommendations of registered index-linked annuities (RILAs).

The Wesley Chapel, Florida firm failed to establish written policies, procedures, and a supervisory system reasonably designed to comply with Regulation Best Interest for RILA recommendations to retail customers.

The firm did not reasonably supervise recommendations that customers exchange insurance policies, fixed index annuities, and variable annuities for RILAs. When reviewing these exchange recommendations, the firm failed to consider various disadvantages including relinquishment of death benefits or income riders and incurrence of surrender charges.

The documentation submitted for supervisory review included only limited comparative disclosures. It did not contain sufficient information to determine why customers would benefit from the recommended RILA despite the disadvantages of surrendering their existing investments.

The firm's supervisory system also failed to identify and follow up on red flags such as patterns of customers relinquishing valuable riders and benefits and incurring surrender charges as a result of exchange recommendations.

RILAs, sometimes called "buffer annuities," offer some downside protection while providing exposure to market gains. However, they may lack features available in other annuity types, such as death benefits or guaranteed income riders. When customers exchange existing annuities for RILAs, they may lose valuable benefits and incur surrender charges.

For investors considering an annuity exchange, carefully compare all features and costs of your existing product against the proposed replacement. Ensure you understand what benefits you may be giving up and what costs you may incur.