Thursday, The Mass Mutual Mutual Life Insurance Company agreed to settle the SEC charges that they violated securities rules by failing to sufficiently disclose the potential negative impact of a “cap” it placed on complex variable annuity products.
The SEC investigation found that MassMutual included the “cap” feature in optional riders offered to investors. The cap potentially affected $2.5 billion dollars worth of variable annuities. The SEC also found the prospectuses nor the sales literature adequately explained that if the guaranteed minimum income benefit value would no longer earn interest if the cap were reached.
MassMutual has agreed to pay the $1.625 million dollar penalty. Mark Cybulski, a spokesman for MassMutual, says the company “is pleased to have resolved this matter with the SEC.” In resolving the matter, he said, “MassMutual neither admits nor denies the SEC’s findings. Importantly, the settlement makes clear MassMutual improved the challenged disclosures beginning May 1, 2009, and that the SEC considered our change to these riders to eliminate the maximum GMIB value or ‘cap’–a change that benefits all contract holders with GMIB 5 and GMIB 6 riders. As the SEC notes in its announcement, no investors were harmed in this matter.”