Northwestern Mutual Investment Management Company, Llc

Allegations: ADVERTISEMENTS SENT BY AGENTS TO PROSPECTIVE CLIENTS MISREPRESENTED AGENT EXPERIENCE AND CLIENT BASE. Status: Final Sanction Detail: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSENTED TO AN ORDER AND PAID AN ADMINISTRATIVE PENALTY OF $200,000. Summary: MATTER CLOSED ON AUGUST 24, 2023, WITH THE PAYMENT OF A FINE.

Allegations: FINE, RESTITUTION AND INJUNCTION RELATED TO THE REPLACEMENT OF DEFERRED ANNUITY CONTRACTS WITH IMMEDIATE INCOME ANNUITY CONTRACTS Status: Final Sanction Detail: THE NEW YORK DEPARTMENT OF FINANCIAL SERVICES ("NYDFS") ISSUED A CONSENT ORDER AND IMPOSED A $26,000 FINE AGAINST REGISTRANT'S AFFILIATE, THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ("NORTHWESTERN MUTUAL"), RELATING TO A PRACTICE ARISING FROM THE REPLACEMENT OF DERFERRED ANNUITY CONTRACTS WITH IMMEDIATE INCOME ANNUITY CONTRACTS IN VIOLATION OF THE DISCLOSURE AND SUITABILITY REQUIREMENTS OF CERTAIN NEW YORK REGULATIONS. THE FINE WAS PAID ON 10/4/2019. THE CONSENT ORDER ALSO IMPOSED REMEDIATION AND RESTITUTION FOR THE CONTRACT HOLDERS OF THE REPLACEMENT CONTRATS. NORTHWESTERN MUTUAL AND NYDFS AGREED ON A REVIEW AND RESTITUTION PROCESS TO DETERMINE THE AMOUNT OF RESTITUTION PAYABLE. THE CONSENT ORDER IMPOSED AN INJUNCTION REQUIRING NORTHWESTERN MUTUAL TO COMPLY WITH THE DISCLOSURE AND SUITABILITY REQUIREMENTS OF CERTAIN NEW YORK REGULATIONS. Summary: MATTER CLOSED ON SEPTEMBER 24, 2019

Allegations: THE VERMONT DEPARTMENT OF FINANCIAL REGULATION ASSERTS THAT NORTHWESTERN MUTUAL DID NOT COMPLY WITH VERMONT LAW BY PAYING INTEREST BEFORE SETTLEMENT OF LIFE INSURANCE DEATH CLAIMS AT LESS THAN THE VERMONT STATUTORY RATE FOR CLAIMS IN WHICH THE BENEFICIARY RESIDED IN VERMONT AND THE LIFE INSURANCE POLICY WAS ISSUED FOR DELIVERY IN A STATE OTHER THAN VERMONT. THE ALLEGATIONS ARE DISPUTED. Status: Final Sanction Detail: PAYMENT OF A $287,000 ADMINISTRATIVE PENALTY. NORTHWESTERN MUTUAL MADE ADDITIONAL INTEREST PAYMENTS TO VERMONT BENEFICIARIES IN 2017. Summary: THE VERMONT INTEREST STATUTE DOES NOT STATE THE REQUIRED NEXUS TO VERMONT FOR THE STATUTE TO APPLY. NORTHWESTERN MUTUAL DISAGREES WITH THE CONTENTION THAT THE INTEREST STATUTE APPLIES TO A CLAIM PAID TO A VERMONT BENEFICIARY IF THE LIFE INSURANCE POLICY WAS ISSUED FOR DELIVERY IN A STATE OTHER THAN VERMONT. THE MATTER WAS RESOLVED TO AVOID THE COST AND UNCERTAINTY OF ADMINISTRATIVE PROCEEDINGS AND POTENTIAL JUDICIAL REVIEW.

Allegations: WASHINGTON OFFICE OF INSURANCE COMMISSIONER DETERMINED THAT THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY WAS NOT PAYING THE CORRECT AMOUNT OF INTEREST ON SOME LIFE INSURANCE DEATH CLAIMS GOVERNED BY WASHINGTON LAW. Status: Final Sanction Detail: COMPANY PAID AN ADMINISTRATIVE PENALTY OF $20,000, AGREED TO MAKE AN ADDITIONAL INTEREST PAYMENT ON SOME WASHINGTON LIFE INSURANCE DEATH CLAIMS THAT WERE ORIGINALLY PAID BETWEEN JULY 1, 2016 AND APRIL 12, 2020, AND AGREED TO COMPLY WITH THE OFFICE OF INSURANCE COMMISSIONER'S INTERPRETATION OF THE INTEREST STATUTE FOR THE PAYMENT OF LIFE INSURANCE DEATH CLAIMS FROM APRIL 12, 2020 FORWARD. Summary: WASHINGTON LAW REQUIRES THE PAYMENT OF 8 PERCENT INTEREST ON LIFE INSURANCE DEATH CLAIMS FROM THE DATE OF DEATH TO THE DATE OF PAYMENT BUT DOES NOT SPECIFY HOW THE INTEREST IS CALCULATED. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY USED AN EFFECTIVE INTEREST CALCULATION BECAUSE IT CONSIDERED THIS METHOD TO BE A BETTER MEASURE OF THE TIME VALUE OF MONEY TO THE BENEFICIARY. WASHINGTON INTERPRETED THEIR STATUTE TO REQUIRE THAT ALL BENEFICIARIES ARE PAID INTEREST THAT IS AT LEAST EQUIVALENT TO SIMPLE INTEREST. ALTHOUGH THE COMPANY BELIEVES THAT ITS INTERPRETATION OF THE STATUTE WAS REASONABLE AND ITS CALCULATION METHOD PAID MORE INTEREST TO SOME BENEFICIARIES, THE COMPANY AGREED TO RESOLVE THE ADMINISTRATIVE ACTION TO AVOID THE COST AND EXPENSE OF FURTHER PROCEEDINGS.

Allegations: THE WASHINGTON OFFICE OF INSURANCE COMMISSIONER DETERMINED THAT THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY ACCEPTED ANNUITY APPLICATIONS FROM PRODUCERS THAT DID NOT COMPLETE THE REQUIRED ANNUITY SUITABILITY TRAINING. Status: Final Sanction Detail: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY CONSENTED TO AN ORDER AN PAID AN ADMINISTRATIVE PENALTY OF $2,000. Summary: MATTER WAS CLOSED WITH THE PAYMENT OF THE ADMINISTRATIVE FINE.

Allegations: EMPLOYEES OF NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC (NMIS), NORTHWESTERN MUTUAL INVESTMENT MANAGEMENT COMPANY, LLC (NMIMC), AND MASON STREET ADVISORS, LLC (MSA) SENT AND RECEIVED OFF-CHANNEL ELECTRONIC COMMUNICATIONS RELATED TO THE BUSINESS OF THE ENTITIES. THESE OFF-CHANNEL ELECTRONIC COMMUNICATIONS WERE NOT CAPTURED AND RETAINED. FAILURE TO IMPLEMENT POLICIES AND PROCEDURES THAT PROHIBIT OFF-CHANNEL COMMUNICATIONS RESULTED IN FAILURE TO SUPERVISE. Status: Final Sanction Detail: NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC (NMIS), NORTHWESTERN MUTUAL INVESTMENT MANAGEMENT COMPANY, LLC (NMIMC), AND MASON STREET ADVISORS, LLC (MSA) WERE CENSURED AND ORDERED TO JOINTLY AND SEVERALLY PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $16,500,000. NMIS MUST CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS OF SECTION 17A OF THE EXCHANGE ACT AND RULE 17A-4 THEREUNDER. NMIMC AND MSA MUST CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS OF SECTION 204 OF THE ADVISERS ACT AND RULE 204-2 THEREUNDER. NMIS, NMIMC, AND MSA WILL RETAIN AN INDEPENDENT COMPLIANCE CONSULTANT TO CONDUCT A REVIEW OF POLICIES AND PROCEDURES, TRAINING, SURVEILLANCE AND TECHNICAL SOLUTIONS RELATED TO ELECTRONIC COMMUNICATIONS. FOR TWO YEARS, NMIS, NMIMC, AND MSA WILL NOTIFY THE SEC OF ANY DISCIPLINE RELATED TO THE PRESERVATION OF ELECTRONIC COMMUNICATIONS. NMIS, NMIMC, AND MSA WILL HAVE THEIR RESPECTIVE INTERNAL AUDIT FUNCTIONS CONDUCT AUDITS TO ASSESS POLICIES AND PROCEDURES, TRAINING, SURVEILLANCE AND TECHNICAL SOLUTIONS RELATED TO ELECTRONIC COMMUNICATIONS. Summary: IN FEBRUARY 2024, NMIS, NMIMC, AND MSA ENTERED INTO AN OFFER OF SETTLEMENT WITH THE SEC IN WHICH THEY ADMITTED THAT NMIS VIOLATED SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER AND NMIMC AND MSA VIOLATED SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER FOR FAILING TO MAINTAIN RECORDS OF CERTAIN BUSINESS-RELATED COMMUNICATIONS MADE BY EMPLOYEES WHEN THEY USED THEIR PERSONAL DEVICES ("OFF-CHANNEL COMMUNICATIONS") AND FOR FAILING TO SUPERVISE THEIR ASSOCIATES' BUSINESS-RELATED COMMUNICATIONS. THE SETTLEMENT WAS RELATED TO A SEC RISK-BASED INITIATIVE, WHERE THE SEC INVESTIGATED A LARGE NUMBER OF FINANCIAL SERVICES FIRMS TO DETERMINE WHETHER THOSE FIRMS WERE PROPERLY RETAINING BUSINESS-RELATED TEXT AND INSTANT MESSAGES AND OTHER OFF-CHANNEL COMMUNICATIONS SENT AND RECEIVED ON EMPLOYEES' PERSONAL DEVICES. FOLLOWING THE COMMENCEMENT OF THE SEC'S INITIATIVE, NMIS, NMIMC, AND MSA COOPERATED WITH THE SEC. IT WAS DISCOVERED THAT CERTAIN EMPLOYEES COMMUNICATED OFF-CHANNEL USING NON-APPROVED METHODS ON THEIR PERSONAL DEVICES ABOUT BROKER-DEALER AND INVESTMENT ADVISER BUSINESS.