Agency Announces VUL Market-Timing Fine

Meanwhile, Jefferson Pilot Securities, a sister company, has agreed to pay $125,000 in fines to resolve NASD charges concerning e-mail archives for “registered persons.” From Jan. 1, 2001, to Dec. 31, 2003, Jefferson Pilot Securities’ e-mail system purged the e-mail communications of 217 registered persons after 60 days, NASD says.

“NASD rules require that e-mail communications be retained for no less than 3 years,” NASD says in the announcement.

The enforcement action against Jefferson Pilot Variable is the first NASD enforcement action involving market timing in VUL subaccounts, NASD says.

Neither Jefferson Pilot unit has admitted or denied the NASD charges, but each company has consented to the entry of NASD’s findings, NASD says.

Mason agrees that the Jefferson-Pilot units have neither admitted nor denied the NASD charges, but he does emphasize that the units reported their problems to NASD themselves.

Jefferson Pilot “took immediate steps toward resolution of the deficiencies and restitution to investors,” Mason says. “We would also note that Jefferson Pilot fully cooperated with the NASD during their review of these issues. Our goal is to ensure we operate with the highest standards of integrity and in compliance with all regulations.”

In addition to fining the 2 Jefferson-Pilot units, NASD has required Jefferson Pilot Variable to certify that Jefferson Pilot Variable has disclosed all instances of transfers within VUL subaccounts that violated the policy prospectus and that Jefferson Pilot Variable now has the controls needed to enforce prospectus transfer limits.

Jefferson Pilot Securities has had to certify that it has improved its supervision of e-mail retention rules.