Indianapolis Insurance Company Faces Scrutiny over Annuity Sales Practices

February 20, 2001

American United Life Insurance Co. is denying charges by the National Association of Securities Dealers it has used “misleading and unbalanced” sales literature to sell variable annuities.

The Indianapolis-based insurer has not agreed to a financial settlement as have five other groups similarly charged by NASD this week. Those companies were Prudential Securities, First Union Brokerage Services, Allmerica Investments, Lutheran Brotherhood Securities and broker Ralph C. Evans of Morgan Stanley Dean Witter.

All five companies have agreed, without admitting or denying guilt, to change their practices and pay restitution and fines totaling more than $112,000. AUL, however, believes it has complied with NASD regulations and, according to a Knight Ridder/Tribune news service report quoting AUL spokesman James Freeman, is “continuing to cooperate with NASD representatives to try and resolve this issue.”

NASD alleged that AUL “failed to adequately disclose that variable contracts purchased for tax-deferred plans provide no additional tax benefit to the purchaser,” the news service reported. NASD also alleged that AUL used on a web site “language that implied the purchaser tax benefits are available in tax- deferred plans only if they are funded with annuity contracts.”

The regulatory group also alleged AUL failed to make other disclosures “and neglected to establish, maintain and enforce” certain written supervisory procedures involving advertising and sales literature.

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