The SEC is investigating AIG sales practices (in its Valic division) with schools districts. Part of the investigation includes looking into whether money Valic gives to schools for certain expenses even as it offers plans, advice, and products to those schools. Oh, and there is the matter of the compensation system for sales reps, i.e., sales reps get bigger bonuses for selling more expensive products and it is not clear that their disclosures of such an upside for them were clear. Oh, and one last thing. The SEC is looking at those who do legal and compliance work for the school districts on their retirement plans. The lawyers are looking at the lawyers who are responsible for making sure retirement plans meet disclosure standards.
AIG has placed several Valid executives on leave, but declined to comment on the investigation. Conflicts of interest are at the heart of this investigation. Only two ways to deal with a conflict of interest: don’t or disclose. In this investigation, the focus seems to be one the adequacy of the disclosures.