UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 8, 2004
ING Life Insurance and Annuity Company
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(Exact name of registrant as specified in its charter)
STATE OF INCORPORATION COMMISSION FILE NUMBERS IRS EMPLOYER I.D. NO.
Connecticut '33 Act Numbers: 333-86278; 333-86276 #71-0294708
151 Farmington Avenue, Hartford, Connecticut 06156
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code .......... (860) 273-0123
THIS FILING IS MADE IN ACCORDANCE WITH ITEM NO. 8.01 OF SECTION 8 OF FORM 8-K:
OTHER EVENTS.
ING U.S. PROVIDES FURTHER UPDATE ON TRADING OF U.S. MUTUAL FUNDS
o ING has publicly committed to reimburse any ING Fund (U.S.) or its
shareholders affected by inappropriate trading for any profits that accrued
to any person who engaged in improper frequent trading for which ING is
responsible. Management believes that the total amount of such
reimbursements will not be material to ING or its U.S. business.
o ING directly communicated its internal review findings to its nearly 4
million investment customers and institutional consultants via individual
letters and also made disclosure in 2003 Form 10-Ks filed in March 2004.
o ING updated its Code of Conduct for employees reinforcing employees'
obligation to conduct personal trading activity consistent with the law,
disclosed limits, and other requirements. All employees are required to
certify understanding of, and compliance with, the Code on an annual basis.
In addition, certain employees in sensitive positions, including all senior
managers, are required to disclose all personal trading in ING Funds (U.S.)
and funds offered through ING products, and are subject to minimum holding
periods for those funds.
o ING Funds (U.S.) updated their respective Codes of Ethics, applicable to
investment professionals and certain other fund personnel, requiring them
to pre-clear any purchases or sales of ING Funds that are not systematic in
nature (i.e., dividend reinvestment), and imposing minimum holding periods
for shares of ING Funds (U.S.).
o ING instituted an "Excessive Trading Policy," applicable to all customers,
that establishes stringent rules regarding the frequency of fund trades.
ING does not make exceptions to this policy. First-time violators are sent
a warning letter. Second-time violators must submit all fund trades by U.S.
mail for a period of six months. ING reserves the right to withdraw
automated trading privileges at any time.
o ING reorganized and expanded its U.S. Compliance Department, and created an
Enterprise Compliance team to enhance controls and consistency in
regulatory compliance.
ING COMMITMENT TO ITS CUSTOMERS
ING is committed to conducting our business with the highest standards of
ethical conduct with zero tolerance for noncompliance. Accordingly, ING was
disappointed that our voluntary internal review identified the situations
described below. Viewed in the context of the breadth and magnitude of our U.S.
business as a whole, Management does not believe that ING's acquired companies
had systemic ethical or compliance issues in these areas. Nonetheless, given
ING's refusal to tolerate any lapses, we have taken the steps noted above, and
will continue to seek opportunities to further strengthen our internal controls.
ING INTERNAL REVIEW
In addition to responding to regulatory and governmental requests, ING
management, on its own initiative, has conducted, through independent special
counsel and a national accounting firm, an extensive internal review of trading
in ING insurance, retirement, and mutual fund products. The goal of this review
was to identify any instances of inappropriate trading in those products by
third parties or by ING investment professionals and other ING personnel. ING's
internal review related to mutual fund trading is now substantially completed.
Beyond the information reported last March, ING has not reported any new
developments. ING companies previously reported internal review findings in 2003
Form 10-K filings with the SEC; below, we provide further amplification and
detail to this previously-reported information.
Of the millions of customer relationships that ING maintains, the internal
review identified several isolated arrangements allowing third parties to engage
in frequent trading of mutual funds within our variable insurance and mutual
fund products, and identified other circumstances where frequent trading
occurred despite measures taken by ING intended to combat market timing. Each of
these arrangements has been terminated and was fully disclosed to regulators,
and to the independent trustees of ING Funds (U.S.).
Most of the identified arrangements were initiated prior to ING's acquisition of
the businesses in question in the U.S. The companies in question did not receive
special benefits in return for any of these arrangements, which have all been
terminated.
Based on the internal review, Management is confident that, although
unfortunate, this small number of isolated issues identified do not represent a
systemic problem in any of the companies which were involved.
More specifically, these instances included the following:
o Seven years ago, agreements were reached that permitted the owner of seven
variable life insurance policies issued by Reliastar Life Insurance Company
("Reliastar") to engage in frequent trading, and to submit orders until 4pm
Central Time. Reliastar was acquired by ING in 2000. We do not believe that
profits were realized by the customer from the late trading aspect of the
arrangement. Certain employees were terminated and/or disciplined in
connection with this arrangement.
o In 1998, then-employees of Golden American Life Insurance Company
("Golden") entered into an arrangement with a broker-dealer that permitted
that firm to frequently trade up to certain specific limits in a fund
available through a Golden retail variable annuity product. No employee
responsible for this arrangement remains at the company.
o In 1998, then-Pilgrim Funds entered into a written arrangement with a
broker that permitted the broker to frequently trade in Pilgrim Funds up to
certain specified limits. Dating from 1995 or 1996, Pilgrim also had
informal, oral arrangements with two brokers that permitted frequent
trading. Pilgrim Funds were acquired by ReliaStar in 1999; ReliaStar was
acquired by ING in 2000. Certain employees were disciplined in connection
with this matter.
o In 2001, ReliaStar entered into a selling agreement with a broker-dealer
that had previously utilized frequent trading strategies with its clients.
Then-senior management instructed Reliastar employees to ensure that
specific written trading limits were imposed on this broker-dealer.
Notwithstanding these instructions, specific written limits were not
imposed as ordered, and the broker-dealer subsequently engaged in frequent
trading. Certain employees were terminated and/or disciplined in connection
with this matter.
o One investment professional associated with Aeltus Investment Management,
Inc. engaged in extensive frequent trading in ING Funds (U.S.). Aeltus was
acquired by ING in 2000. In 2001, certain frequent trading by the
professional was identified by his superiors, he was told to stop such
trading, and he temporarily did so. However, he resumed his frequent
trading in ING Funds (U.S.) in 2003. This professional was terminated for
cause and incurred substantial financial penalties as a result. Another
investment professional engaged in more limited frequent trading in other
ING Funds (U.S.) and was disciplined as a result - and is no longer with
the company.
About ING:
ING Group is a global financial institution of Dutch origin offering banking,
insurance and asset management to more than 60 million private, corporate and
institutional clients in more than 50 countries. With a diverse workforce of
more than 115,000 people, ING comprises a broad spectrum of prominent companies
that increasingly serve their clients under the ING brand.
In the U.S., the ING family of companies offers a comprehensive array of
financial services to retail and institutional clients, which include financial
planning, life insurance, retirement plans, mutual funds, managed accounts,
alternative investments, direct banking, institutional investment management,
annuities, employee benefits, and reinsurance. ING holds top-tier rankings in
key U.S. markets and serves more than 14 million customers across the nation.
For more information, visit www.ing.com
Media inquiries should be directed to Cindy Schaus, Head of External
Communications at 515.698.7607, or cindy.schaus@us.ing.com.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ING Life Insurance and Annuity Company
(Registrant)
Date: September 8, 2004 /s/Linda E. Senker
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Linda E. Senker