FINRA To Postpone Suitability Review Implementation

The Financial Industry Regulatory Authority has decided to put off enforcing a proposed deferred variable annuity sales review regulation until 180 days after it rewrites the regulation.

The proposed regulation, Rule 2821(c), would require that a FINRA member firm principal review the suitability of each deferred VA application within 7 business days after the customer had signed the application and before the application had been submitted to the insurance company.

“A number of firms asserted that 7 business days beginning from the time when the customer signs the application may not allow for a thorough principal review in all cases,” FINRA officials write in an explanation of the decision to postpone implementation of the proposed rule. “These firms asked that a different timing mechanism be used.”

Some commenters also questioned whether the proposed rule should apply to broker-dealers that do not make investment recommendations to customers and do not employ principals to perform suitability reviews, officials write.

FINRA now is preparing to respond to those concerns and others by proposing “substantive amendments” to Rule 2821 and wants to notify member firms that they can wait until a later date to comply with the rule, officials write.