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A part of an insurance company that serves about 5 million customers, including professors and doctors, will pay $97 million to settle claims it misled consumers into moving retirement savings into higher-fee accounts.
On Tuesday, the U.S. Securities and Exchange Commission (SEC) and New York Attorney General Letitia James announced the settlement with a unit of Teachers Insurance and Annuity Association of America (TIAA), TIAA-CREF Individual & Institutional Services, Reuters reported.
The settlement comes after it was alleged that, from Jan. 2012 to March 2018, TIAA advisers pressured their clients to move retirement savings from lower-cost, employer-sponsored plans to higher-cost, individually-managed accounts.
Regulators alleged some TIAA-CREF advisors misled consumers by saying they “put the client first.” They then recommended the investors move their funds to the higher-fee account.
James said the conflicts of interest allowed the company — which has more than $1.3 trillion of assets under management — to generate hundreds of millions of dollars more in revenue.
“TIAA relied on its reputation as a trusted and objective financial advisor to profit off of clients through fraudulent and manipulative sales practices,” James said.
“We’re finally making things right.”
The settlement will be paid out to tens of thousands of affected customers in restitution, Reuters reported. It contains a $9 million SEC civil fine.
TIAA did not admit any wrongdoing in the settlement, though the company said it would reform parts of its processes, and would end financial incentives for selling managed accounts, Reuters reported.
“We regret the times that we did not live up to our clients’ expectations of us,” TIAA said. “We have learned some valuable lessons and have applied those lessons to enhancing our training, supervisory controls and disclosures.”
In 2014, TIAA reached another settlement in a class action lawsuit accusing retirement funds of profiting off of college professors’ savings by delaying trades in violation of the Employee Retirement Income Security Act.
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