Rule on sales of deferred VAs approved
The SEC has approved a FINRA rule intended to improve B-D sales practices for purchases and exchanges of deferred VAs.
The Securities and Exchange Commission has approved a new FINRA rule intended to improve broker-dealer sales practices for purchases and exchanges of deferred variable annuities.
The rule, intended to protect senior citizens against financial fraud, is made up of four components.
It imposes a suitability obligation tailored to the characteristics of deferred variable annuities.
It contains standards for principal review and requires principals to review transactions before the customer’s application is forwarded to the issuing insurance company for processing.
It requires members to establish and maintain specific written supervisory procedures designed to achieve compliance with the standards set forth in the proposed rule.
Finally, it requires members to develop and document specific training policies or programs designed to ensure compliance with the requirements of the rule and salespersons’ understanding of the material features of deferred variable annuities.
The SEC said it also issued an exemptive order allowing members of FINRA — The Financial Industry Regulatory Authority — to hold customer funds for no more than seven business days while completing the required principal review under the new rule without becoming fully subject to Exchange Act and being required to maintain higher levels of net capital.
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