According to FINRA, Voya Financial Advisors, Inc. (CRD #2882), based in Windsor, Connecticut, was censured and fined $500,000 pursuant to a Letter of Acceptance, Waiver and Consent (AWC) issued on January 25, 2024.

FINRA found that Voya Financial Advisors paid approximately $2.9 million in transaction-based compensation to an unregistered entity, a limited liability company (LLC) primarily owned by an insurance agent who was not registered with FINRA, in connection with the sale of variable universal life insurance (VUL). Under securities regulations, transaction-based compensation may only be paid to properly registered individuals and entities. This rule exists to ensure that individuals receiving compensation for securities transactions are subject to regulatory oversight and supervision.

The findings stated that the firm and the unregistered entity were parties to a Variable Marketing Agreement, which provided that the unregistered entity would provide a variety of services to facilitate VUL sales, including distributing sales materials and assisting with sales promotional activities. Variable universal life insurance is considered a security because it has an investment component, meaning its sale is subject to securities regulations and FINRA oversight.

Pursuant to the Variable Marketing Agreement, the firm received gross transaction-based compensation of approximately $8.7 million from the VUL sales. After making payouts to its own registered representatives and paying $2.9 million to the unregistered entity, the firm retained approximately $545,000 of the gross compensation. The substantial payment to the unregistered entity represented a significant portion of the overall compensation from these sales.

Without admitting or denying the findings, Voya Financial Advisors consented to the sanctions and the entry of findings.

This case carries significant implications for investor protection. The requirement that transaction-based compensation be paid only to registered entities is a cornerstone of the regulatory framework. Registration ensures that individuals and firms involved in securities transactions meet minimum qualification standards, are subject to ongoing regulatory oversight, and can be held accountable for their conduct. When compensation flows to unregistered parties, it circumvents these protections and creates risks for investors who may be dealing with individuals outside the regulatory system. The $500,000 fine reflects the seriousness with which FINRA treats violations involving unregistered compensation arrangements, particularly where the payments were substantial and ongoing under a formal agreement.