The life insurance industry is voicing support for the Financial Industry Regulatory Authority’s decision to delay the effective date of certain provisions of a new rule creating new suitability, supervisory and training mandates for sale of variable annuities by registered broker-dealers.

Under the latest action by FINRA, the effective date of the principal review and approval requirements of the new rule will be delayed until Aug. 4 while the agency–based on new comments–determines that further rulemaking is required to clarify the principal review requirements of the rule.

Comments on how the rule should be changed are due by Jan. 24.

FINRA said that if it concludes that further rulemaking is warranted, it will file a separate rule change proposal with the SEC.

At the same time, the other provisions of the sweeping new rule will go into effect as scheduled on May 5.

“The American Council of Life Insurance supports FINRA’s request for further amendment and delayed applicability of Rule 2821,” said Carl B. Wilkerson, ACLI vice president and chief counsel-securities and litigation.

Gary Sanders, senior counsel of the National Association of Insurance and Financial Advisors, said, “A delayed effective date is probably a prudent idea and could aid in having a seamless transition to life under the new rule, given the impact that the new enhanced suitability and supervisory review requirements will have on the operations of broker-dealers and producers.”

Wilkerson said the issue is clarity and “greater effectiveness.”

He explained that although Rule 2821 evolved over 4 years in response to comment from life insurers and distributors, “it is paramount that FINRA resolve outstanding interpretive and operational issues inherent in the rule.”

The proposed delay “should allow sufficient time to evaluate interpretive ambiguities about supervisory review and the use of ‘suspense accounts’ for payments pending supervisory approval,” he said.

The added time will also allow better implementation of systems changes that the new rule would require for many broker-dealers and life insurers, Wilkerson explained. “During its development, Rule 2821 elicited thousands of comment letters from the life insurance industry,” he said. “It is both refreshing and constructive that FINRA demonstrates sufficient flexibility to reexamine the rule to achieve clarity and greater effectiveness.”

According to lawyers at Goodwin, Procter, which specializes in securities practices, concerns voiced by the industry about the regulation are centered on:

–Whether the 7-business day review beginning with signature of the application is the appropriate review period.

–Whether broker-dealers that do not make any recommendations to customers should be subject to the principal approval requirements.

–Whether insurance companies should be permitted to deposit customer funds in a suspense account prior to the completion of principal review.