The American Council of Life Insurers will be asking federal regulators to reject a proposed variable annuity sales suitability regulation developed by the National Association of Securities Dealers.
The U.S. Securities and Exchange Commission, which has the authority to approve or disapprove NASD rules, published the proposed suitability regulation recently in the Federal Register. The proposed regulation would impose stricter supervision requirements on broker-dealers and managers than the current regulation does.
The comment period for the proposed rule closes Aug. 11. The SEC usually offers much longer comment periods for proposed rules that it develops on its own. The SEC tries to act within 35 days of publishing an NASD rule, but it has the authority to extend that period if it desires, an industry official says.
The fact that the SEC has allowed only a 3-week comment period seems to imply that the agency plans to move swiftly to implement a final rule after the comment period ends.
However, Carl Wilkerson, chief counsel for securities and litigation at the ACLI, says the NASD proposal is “an exercise in regulatory grandstanding.”
“At this point, our position is that we will strongly oppose this,” Wilkerson says.
The NASD and the SEC initially released a highly restrictive proposal in April 2004, which prompted a huge outcry from the life insurance industry.
The ACLI wrote in an August 2004 comment letter that the regulatory changes included in the April 2004 draft “would impose unwarranted and unreasonable burdens on broker-dealers affiliated with life insurers. It dilutes the value of meaningful disclosure and overloads with redundant information.”
The ACLI suggested in the letter that the SEC and NASD jettison the proposal and start over.
The NASD came out with another proposal in December 2004, and that version is the basis for the rule in the SEC’s current proposal.
The December 2004 version “was significantly different” from the original proposal and was much more acceptable to the industry, according to Mike DeGeorge, general counsel of the National Association for Variable Annuities, Reston, Va.