VALIC Financial Advisors, a unit of American International Group, agreed to pay $40 million to settle charges filed by the SEC alleging it failed to disclose conflicts of interest and investment practices that generated millions of dollars in fees and other financial benefits.
The charges center around VFA's dealings with teachers in Florida, a state in which it serves as a financial services vendor for nearly every school district, according to the SEC.
For 13 years, Variable Annuity Life Insurance Co., or VALIC, VFA's parent company that rebranded to AIG Retirement Services in 2019, made payments to an entity owned by the Florida teachers unions in exchange for that entity's exclusive endorsement of VFA as its preferred financial services partner and the entity's agreement to not promote or endorse VFA's competitors. VALIC then provided the teachers union entity with coordinators "who deceptively presented themselves as employees of the entity" to promote and recommend VFA services and to teachers, the SEC said in a news release. Those teachers saving for retirement were not told about the arrangement, the SEC said.
VFA and VALIC earned more than $30 million on the products it sold to Florida K-12 teachers during the period covered by the SEC's order, which stretched from 2006 to 2019.
"Teachers need and deserve our attention, and we are dedicated to ensuring they receive all of the information they are entitled to when making decisions about their financial futures," SEC Chairman Jay Clayton said in a statement. "Too often educators are targeted with misconduct related to their investments. Our nation's educators, and our Main Street investors more generally, are entitled to full and accurate information about the incentives and conflicts affecting their financial advisers."
In a separate order, the SEC charged VFA with making false and misleading statements and failing to disclose conflicts of interest related to receiving millions of dollars in financial benefits from client mutual fund investments that were generally more expensive than other mutual funds available to VFA clients.
VFA did not admit to or deny the SEC's findings. "We are pleased to have resolved these matters involving VALIC Financial Advisors, which is taking all necessary steps to ensure a robust program of disclosure improvements and governance enhancements," an AIG spokeswoman said in an email.
VFA has agreed to set advisory fees for all Florida K-12 teachers who currently participate in its advisory product in Florida's 403(b) and 457(b) retirement programs at its most favorable rates in the Florida K-12 market, the SEC said.