Nationwide Life Insurance Company has agreed to pay $8 million in order to settle charges filed by the Securities and Exchange Commission alleging the insurer regularly violated pricing rules while processing orders of some of its insurance products.
An SEC statement released last Thursday says Nationwide intentionally delayed delivering mail so that it didn’t have to use current-day prices.
“For more than a 15-year period, Nationwide 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,” said Sharon Binger, director of the SEC’s Philadelphia regional office.
According to a
Wall Street Journal report, Nationwide asked the post office to separate mail directed to its variable contract business from mail directed to boxes for other lines of business. The insurer apparently asked the mail delivery service to travel to the post office at 3AM, 5AM and 7AM each business day to retrieve mail for other lines of business. The post office was asked not to collect variable contract mail at those times, however.
In fact, if the contracts arrived in Nationwide’s parking lot before 4PM, Nationwide allegedly told delivery people to wait until 4:01PM to enter the building.
This led “some couriers to intentionally delay their arrival time at Nationwide by stopping to purchase meals or fuel,” the SEC said.
By engaging in this behavior, Nationwide was able to charge higher prices for mutual fund shares, as rules require an investment company to compute the value of its shares at least once daily at a specific time determined by the board of directors.
By paying the $8 million penalty, Nationwide settled charges without admitting or denying any wrongdoing.
Nationwide spokesman Ryan Ankrom told the
Journal that “there were no allegations that Nationwide benefited from its PO box mail processing practices or the process benefited certain groups of investors over others.”
He added that Nationwide chose to settle in order to focus on the needs of its members.
