Shares of insurance giant AIG dropped 1% on reports that a subsidiary of the insurer, Valic, is under investigation by the Securities and Exchange Commission about its sales to schools and universities, people familiar with the matter told the Wall Street Journal on Tuesday.
The SEC is looking into Valic's sales and disclosure practices and whether retirement plan clients at schools and universities are being properly informed about compensation and product costs. Valic is a unit of AIG that specializes in retirement plans,
The inquiry revolves around whether Valic representatives were transparent about how much compensation they received when clients chose higher-cost products, and if Valic's pay structure favored employees that recommended the high-cost products.
Two former Valic employees told the Wall Street Journal that Valic employees earn higher commission for high-cost products, like annuities, than low-cost products, like mutual funds.
The SEC is also looking into Valic's relationship with certain school districts, where Valic has duel roles of providing help with school costs and advising teachers and school employees.
Several high-level executives have been on administrative leave in the past few weeks, people told the WSJ.
"We cannot comment at this time on any regulatory inquiries or related personnel matters. It is our policy to cooperate fully with all regulatory inquiries and to take steps to ensure compliance with the law and best practices," an AIG spokesperson told CNBC.
Shares of AIG closed down 0.9% on Tuesday.
—Read the full Wall Street Journal story here.
—CNBC's Jim Forkin and Contessa Brewer contributed reporting.