A Step Towards Uniform Suitability Protection For Annuity Investors
In the purchase, sale or exchange of an annuity, the suitability requirements of a seller and the protections offered to the customer, vary greatly depending on the product and the state in which the transaction occurs. The reason, of course, is that the sale of fixed annuities is regulated solely by state insurance commissioners, whereas the sale of variable annuities is regulated by the state insurance commissioners, along with the SEC, NASD, and state securities regulators.
Last year, the Minnesota Department of Commerce and the NASD formed the Annuity Working Group to evaluate regulatory standards for annuities. This week, members of the Annuity Working Group, including the NASD and state regulators from Minnesota, Iowa, and North Dakota, announced in a news release their joint support for the Suitability in Annuity Transactions Model Regulation ("Model Suitability Rule"). The Model Suitability Rule was recently approved by the National Association of Insurance Commission, but would have to be adopted on a state-by-state basis. In essence, the rule imposes a suitability requirement on the purchase or exchange of fixed annuities in states where no such requirement currently exists, and would further impose a suitability obligation on insurance companies in the sale of variable annuities.
If uniform suitability protection for investors is the goal - this is a step in the right direction.
