The SEC announced yesterday that it settled charges against Nationwide Life Insurance Company over allegations related to “routinely violating pricing rules in its daily processing of purchase and redemption orders.” The charges stemmed from how Nationwide handled variable annuity and variable life insurance contract orders received via postal mail at a P.O. box. The SEC alleges that while first class mail generally became available for pickup in the early morning and no later than 10am, Nationwide took steps to avoid collecting the mail related to variable annuity contracts until after the 4pm cutoff time. However, Nationwide’s courier typically delivered variable contract mail that could be tracked (such as priority or express mail) by 11am, which Nationwide subsequently processed the same day.
The SEC claims that Nationwide instructed the post office to separate mail unrelated to its variable contract business and maintain it at a separate area of the loading dock where it was picked up by a private courier at 3 am, 5 am, and 7 am. In contrast, Nationwide instructed the courier not to enter the Nationwide building with the variable contract mail until after 4:01pm.
The release details an instance in which Nationwide staff complained after post office staff inadvertently mixed mail containing orders with other mail, which was all delivered to the Nationwide offices prior to 4pm. During a subsequent meeting with post office staff, Nationwide emphasized the need for “late delivery . . . due to regulations that require Nationwide to process any mail received by 4 p.m. the same day.”
The activity is alleged to have occurred from October 1995 to September 2011. To settle the allegations, Nationwide agreed to a fine of $8 million. In a statement provided to several news outlets, Nationwide said “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.”