FINRA Investigates Firms That Sold Sun Life Annuities Containing Hedge Funds

According to InvestmentNews, the Financial Industry Regulatory Authority (“FINRA”) is investigating sales of certain variable annuities issued by Sun Life Financial, Inc. that contained subaccounts invested in hedge funds: the Foresee Strategies Insurance Fund and the Foresee Strategies 3(c)(1) Insurance Fund LP (collectively “Foresee Funds”).

The Foresee Funds were part of the SALI Multi-Series Funds 3(c)(1) and 3(c)(7), L.P. (collectively “SALI Funds”). The general partner of the Foresee Funds was SALI Fund Partners LLC, and the investment manager was SALI Fund Management LLC. The investment sub-advisor was Jemico, Inc.

In May 2010, the Foresee Funds were closed after experiencing tremendous losses due to, among other things, speculative, naked options trading on the S&P 500. According to InvestmentNews, one Foresee Fund lost 90% of its value and the other lost 75%. Investors in the funds suffered losses of approximately $18 million during the credit crisis.

According to InvestmentNews, individual FINRA arbitration cases have already been filed by investors against a number of brokerage firms for losses in the Sun Life annuities including SagePoint, Financial, Inc., Geneos Wealth Management, Inc., Lincoln Financial Network, FSC Securities Corp., and National Planning Corp. In November, a FINRA arbitration panel awarded $284,000 to a former SagePoint client for losses sustained in the SALI Funds.

In December 2011, Sun Life announced that it would no longer sell new variable annuities or life insurance policies.