The Financial Industry Regulatory Authority has delayed indefinitely implementation of parts of its new rule governing sale of variable annuities by brokers because it plans to propose amendments to the controversial provisions in the near future.
Being delayed are amendments to the rule’s suitability and supervision provisions that were scheduled to go into effect Aug. 4.
Other parts of the rule, No. 2821, will go into effect as scheduled May 5, according to Gary Sanders, senior counsel of the National Association of Insurance and Financial Advisors, and Carl Wilkerson, vice president and chief counsel-securities and litigation, at the American Council of Life Insurers.
Sanders says NAIFA supports FINRA’s request for a delay in the effective date of paragraphs (c) and (d) of Rule 2821 to enable FINRA to reexamine the rule and propose substantive changes to these parts.
“NAIFA commends FINRA’s efforts to be responsive to concerns raised regarding these provisions and believes it is more important to get things right than to adhere to arbitrary timetables and effective dates,” Sanders adds.
Herb Perone, a spokesman for FINRA, says the decision to delay implementation of the rule was “sudden” and was made to give broker-dealers as much notice as possible that they wouldn’t have to implement the suitability and supervision provisions.
They will now have until 6 months after the changes to the provisions are finalized to implement them.
The provisions involved are contained in Rule 2821(c). These are a component of Rule 2821, a package of proposed deferred VA suitability and supervision guidelines approved by the U.S. Securities and Exchange Commission in September 2007.
“The proposed delay of the rule’s supervisory review provisions from the August 4, 2008 effectiveness date should allow sufficient time to evaluate interpretive issues involving supervisory review, the rule’s application to non-recommended transactions, and the use of ‘suspense accounts’ for payments pending supervisory approval,” says Wilkerson.
“Significantly, the added time will also allow better implementation of systems changes that the new rule would require for many broker-dealers and life insurers,” he adds. He notes that during its development, Rule 2821 elicited thousands of comment letters from the life insurance industry.