Lincoln takes $300k fine over VUL marketing arrangement
Finra has imposed a $300,000 fine on Lincoln Financial Distributors, Lincoln’s wholesale distribution franchise, for making transaction-based compensation payments to an unregistered entity.
According to the letter of Acceptance, Waiver and Consent on the case released Monday, Lincoln Financial Distributors, a Finra member since 1967, paid millions in transaction-based compensation to a non-registered entity between March 2018 and September 2019. The payments were in connection with sales of variable universal life insurance, a securities product.
The payments were part of a larger sum of $8.7 million directed to an unaffiliated selling broker-dealer. The firm told the selling broker-dealer to direct a portion of the funds to the unregistered entity, a limited liability company that was not affiliated with Lincoln and owned primarily by an insurance agent who was not Finra-registered.
The arrangement was also ethically questionable as one of the selling broker-dealer’s registered representatives had a minority stake in the entity, according to Finra.
“From March 2018 to September 2019, consistent with Lincoln’s directives, the selling broker-dealer paid approximately $2.9 million in transaction-based compensation to the unregistered entity,” the AWC said.
The chain of payments, Finra explained, was part of a broader variable marketing agreement between Lincoln, its affiliated life insurance company, and the selling broker-dealer.
Under the agreement, the unregistered entity would receive transaction-based compensation in exchange for a variety of services to help with VUL sales, including distributing sales materials and assisting with sales promotional activities. It required all parties to stay in line with federal
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