SEC Approves FINRA Rule Governing Sales Practices of Deferred Variable Annuities
FOR IMMEDIATE RELEASE
2007-178
Washington, D.C., Sept. 10, 2007 - On September 7, the Securities and Exchange Commission approved a new Financial Industry Regulatory Authority (FINRA) rule that is intended to enhance broker-dealer sales practices with respect to purchases and exchanges of deferred variable annuities.
The rule has four primary components. First, it imposes a suitability obligation tailored to the characteristics of deferred variable annuities. Second, 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. Third, the rule requires members to establish and maintain specific written supervisory procedures reasonably designed to achieve compliance with the standards set forth in the proposed rule. And fourth, 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 Commission also issued an exemptive order allowing FINRA members 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 Rule 15c3-3 and being required to maintain higher levels of net capital in accordance with Rule 15c3-1.