"As has been the case since the initiation of the sales practice exam in 2001, W&R intends to respond promptly and thoroughly and is fully cooperating with the NASDs inquiries," the company stated in an 8-K filing with the Securities and Exchange Commission.
The company explained that the NASD is considering bringing action against the company and some of its officers regarding exchanges of some United Investors Life Insurance Co. variable annuity policies for Nationwide policies between January 2001 and August 2002. The exchanges took place after Waddell & Reed stopped selling the United Investors policies and began offering Nationwide annuities instead.
In March 2002, United Life won $50 million in a jury trial against Waddell & Reed for exchanges that took place between Jan. 1, 2001 and Feb. 19, 2002. The company is owned by Torchmark Corp., which spun off Waddell & Reed in 1998. United Life won the case on the basis of "tortious interference and fraud." The dispute was part of a longer history of litigious contention between the companies as Waddell & Reed began to explore outside sources of variable annuity contracts.
More recently, that case was reversed by the Alabama Supreme Court and partially rendered in Waddell & Reeds favor.