SEC Settles With Insurer Over Inadequate Variable Annuity Disclosures
The Securities and Exchange Commission (“SEC”) announced a settlement with Massachusetts Mutual Life Insurance Company (“Mass Mutual”) for $1.65 million concerning allegedly inadequate disclosures on two of its variable annuity riders.
The settlement concerns Mass Mutual’s two guaranteed minimum income benefit riders offered between 2007 and 2009: GMIB 5 and GMIB 6. According to the SEC, Mass Mutual did not adequately disclose to investors the downside of a cap on the GMIB 5 and 6 riders: if the benefit base reached a maximum value, accruals would cease and the value of the contact and the rider would be reduced by subsequent withdrawals.
The SEC alleged in its Complaint that Mass Mutual did not explain in its marketing materials or prospectuses that the GMIB would stop earning interest if and when it reached a maximum value. The SEC claimed that even Mass Mutual’s agents did not understand how the two riders worked.
According to Mass Mutual, it updated the subject disclosures in May 2009 to better explain what happens when a GMIB reaches the maximum value.