Course Objective

The Regulatory Environment for Variable Annuity Sales Personnel and their

Supervisors

SEC

NASD

State Insurance Commissioners

NASD’s Notice To Members 96-86 Identifies Seven Factors in Determining Suitability

1. The Customer’s Insurance Needs

2. The Customer’s Express Preference for Investments Other Than Annuities

3. The Customer’s Understanding of the Complexity of the Variable Annuity

4. The Customer’s Understanding of Premiums

5. The Customer’s Express Need for Liquidity and Short-Term Investment

6. The Customer’s Need for Retirement Income

7. The Customer’s Investment Sophistication and Ability to Monitor Subaccounts.

Additional Regulatory Concerns

Policy Churning & 1035 Exchanges

Questionable Suitability

Failure to Properly Disclose Costs and Policy Fees

Serial Selling (Selling Multiple Policies to One Customer)

Failure to Supervise

Supervision of Sales Personnel

1. Insure Proper Licensing, Registration and Appointment

2. Implement and Review Compliance Procedures

3. Monitor Sales Activity

4. Actively Educate Sales Representatives

5. The Supervisor’s Signature

Concrete Steps For Good Supervision

Training Representatives to Understand Their Legal Obligations

NASD Notice to Members 99-35 (Customer Information)

Maintaining Clearly Identifiable Procedures for Variable Contract Sales

Separation of Duties Between Sales Personnel and Compliance Personnel

Other Supervisory Issues

Cash vs. Non-Cash Compensation Defined

Compensation Practices (Acceptable vs. Inappropriate) NASD Rule 2820

Recordkeeping Requirements

Variable Annuity Sales Supervision Quiz