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Rating:SEC Smites Nationwide Over Mutual Funds, Sort Of Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, May 14, 2015

SEC Smites Nationwide Over Mutual Funds, Sort Of

Reported by Neil Anderson, Managing Editor

Nationwide [profile] just got hit with an $8-million penalty that involves its mutual fund business but is actually about a different product line.

Today the Securities and Exchange Commission (SEC) revealed charges that Nationwide Life Insurance Company, in the words of Sharon Binger (director of the SEC's Philadelphia regional office), "intentionally delayed the delivery of untracked mail containing orders from customers and processed them at the next day's prices in violation of the law," in this case rule 22c-1. The orders that the SEC claims were delayed were for variable annuity and variable life insurance products, and for the mutual funds underlying those products. Nationwide agreed to the settlement, including the $8-million penalty, with the standard disclaimer of not admitting to or denying the findings. [See the SEC's settlement and cease-and-desist order.}

A spokesman for Nationwide emailed MFWire the following statement:

Nationwide and the U.S. Securities and Exchange Commission (SEC) recently agreed to resolve an SEC investigation into the timeliness of Nationwide’s processing of financial transactions in variable annuity and variable life policies sent via non-Priority U.S. Mail to P.O. Boxes prior to September 2011. There were no allegations that Nationwide benefitted from its P.O. Box mail processing practices or the process benefitted certain groups of investors over others. The SEC acknowledges Nationwide’s change in practices that occurred in 2011 and Nationwide’s cooperation in the investigation in the SEC’s order. Nationwide chose to settle this matter to bring closure and remain focused on the needs of its members.


The SEC accuses Nationwide of purposefully delaying receipt of orders until after the 4pm deadline, by dividing the variable annuity and variable life business mail from the rest of its mail. That way, the SEC claims, Nationwide's mail couriers could pick up other mail throughout the day and deliver it to Nationwide's Columbus, Ohio headquarters while leaving the orders to be picked up later to ensure "late delivery". And the SEC says that Nationwide even told the couriers not to bring the variable annuity and variable life mail into Nationwide's building until 4:01pm at the earliest. The charges even say that Nationwide employees complained to the post office when variable annuity and variable life mail got mixed in with the rest of the mail and delivered earlier in the day.

The charges cover the period from October 1995 through September 2011.

This settlement with the SEC comes five months after Nationwide agreed to a different, $140-million settlement in a private lawsuit around mutual funds' revenue sharing payments in Nationwide-run 401(k) plans. 

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