According to FINRA, BBVA Securities Inc. was censured and fined $150,000 for failing to establish adequate supervision of variable annuity exchange rates among its registered representatives.

Variable annuity exchanges occur when a customer replaces one annuity product with another. While sometimes beneficial, exchanges can be problematic if done excessively to generate commissions rather than serve customer interests. Regulators therefore require firms to monitor representatives' exchange patterns.

BBVA Securities relied on transaction-by-transaction approvals from regional supervisors along with periodic reports of each representative's exchange activity. However, the periodic reports only included a single month's transactions and did not calculate the representative's overall rate of exchanges.

The firm had no report, alert, or other system to surveil for representatives with elevated variable annuity exchange rates that might indicate churning or unsuitable recommendations. The firm's written supervisory procedures provided no guidance on what exchange rate or other characteristics would indicate a pattern requiring further review.

Without proper surveillance of exchange rates over time, the firm could miss representatives who were systematically recommending unnecessary exchanges to generate commissions at customers' expense. Variable annuity exchanges often involve surrender charges, new commission cycles, and potential loss of benefits, making inappropriate exchanges particularly harmful to customers.

Investors should be cautious about recommendations to exchange variable annuities and should ask representatives to clearly explain the costs and benefits of any proposed exchange compared to keeping their existing annuity.