For the first time, FINRA put Annuities squarely in the regulatory spotlight. “Many of the recent FINRA enforcement actions involving sales-practice and supervisory failures have centered on variable annuities and exchange recommendations—a reflection of the increased scrutiny outlined in FINRA’s 2025 Oversight Report.” FINRA
In its 2025 Annual Regulatory Oversight Report, FINRA elevated annuities to a standalone focus area, sending a clear message that these products now demand the same rigor, scrutiny, and discipline as other complex investment recommendations.
The report underscores heightened expectations around Reg BI compliance, deep product understanding, and clear, compliant advertising and disclosure practices—signaling that firms can no longer afford informal or inconsistent approaches to recommendations.
What FINRA is flagging
A quick scan of FINRA’s monthly disciplinary actions shows familiar themes:
1) Didn’t surveil annuity exchanges
FINRA continues to expect firms to have surveillance procedures that can spot patterns—especially rates of deferred variable annuity exchanges that may indicate problematic behavior. This expectation is explicitly emphasized in FINRA guidance on variable annuities, including the need for exchange-rate monitoring tied to Rule 2330. FINRA+1
Two firm actions in 2025 put a spotlight on this:
- Company A: $150,000 fine for failing to maintain a reasonably designed supervisory system and WSPs to surveil rates of deferred variable annuity exchanges. FINRA+1
- Company B: $200,000 fine for similar supervisory system/WSP failures around surveillance of deferred variable annuity exchange rates, including lack of guidance on how to determine when exchange rates warrant review. FINRA+1
2) Didn’t document suitability
FINRA also continues to cite problems where recommendations appear “template-driven,” lack customer-specific analysis, or don’t show the advisor evaluated meaningful alternatives.
A February 2025 case illustrates the risk:
- Arlington Securities + a representative: FINRA found unsuitable recommendations where customers were moved from lower-cost mutual funds into higher-cost variable annuities, with the firm’s WSPs and supervision not reasonably designed to catch red flags or require analysis (including whether a qualified account even benefited from the annuity wrapper). FINRA
3) Didn’t supervise annuity purchases/exchanges—and didn’t have Reg BI procedures
In December 2025, FINRA hit another recurring enforcement chord: annuity supervision + Reg BI policies and procedures.
- Company C: $80,000 fine for failures supervising recommendations involving purchases and exchanges of deferred variable annuities, including insufficient systems to assess best interest factors (like risk tolerance and lost rider benefits), inadequate documentation of principal review/approval, lack of surveillance procedures, and failures to maintain Reg BI policies and procedures for a period of time. FINRA
When you line these up, it’s not just “annuities are risky.” It’s more specific:
FINRA is effectively asking: show your work.
Show the comparison. Show the rationale. Show the supervision. Show the evidence trail.
Why this maps directly to Reg BI
Reg BI is a standard that requires firms and advisors to act in the retail customer’s best interest when making a recommendation, supported by a process that addresses disclosure, care, conflicts, and compliance. SEC+2SEC+2
FINRA’s 2025 oversight guidance explicitly connects Reg BI to recommendations involving variable annuities and registered index-linked annuities (RILAs). FINRA
And FINRA Rule 2330 is very direct about what needs to be considered in deferred variable annuity exchanges, including surrender charges, new surrender periods, loss of benefits, changes in fees, and prior exchanges within a lookback window. FINRA
So when FINRA fines firms for weak exchange surveillance or inadequate documentation, it’s not an isolated “annuity issue.” It’s an operational Reg BI issue.
Turn compliance into an opportunity
As illustrated by recent fines, annuity supervision and Reg BI documentation is proving to be as an unavoidable cost. But the firms that win will be the ones that treat it like a scalable advice workflow:
- Faster, more consistent recommendations
- Cleaner oversight and exception handling
- Better client experience (clear rationale, clear disclosures)
- In other words: better process = better business.
Why InvestorCOM: Recommend, compare, document
This is where InvestorCOM can be a force multiplier for annuity business under Reg BI: it helps firms operationalize the “show your work” expectation in a way that works for advisors and stands up to supervision.
And InvestorCOM’s annuity-focused experience (PeerCompare for annuities) is explicitly positioned around collecting and structuring key inputs used in comparison and recommendation workflows. peercompare-annuities-icom.com