The U.S. Securities and Exchange Commission is reviewing a request by the Financial Industry Regulatory Authority to change variable annuity marketing rules.

The SEC today published a notice in the Federal Register seeking comments about efforts by FINRA, Washington, to revise sales practices standards and supervisory requirements for transactions involving deferred variable annuities.

FINRA filed the proposed rule changes with the SEC May 21, and they have been in the works for years.

One controversial section would require company principals to review annuity transaction recommendations for suitability, and to treat “all transactions as if they have been recommended.”

After getting comments suggesting that the rule would force some firms that do not offer recommendations out of the deferred VA business, FINRA reconsidered the original version of the provision.

Now, “FINRA is proposing to limit the rule’s application to recommended transactions,” SEC officials write in a discussion of the changes in the Federal Register notice. “When the transaction is truly initiated by the customer and not recommended by the broker, there generally is less of a concern regarding potential or actual conflicts of interest.”

Because brokers recommend most VA purchases, the rule would still end up covering most VA transactions, the SEC officials write.

“FINRA emphasizes, moreover, that members must implement reasonable measures to detect and correct circumstances when brokers mischaracterize recommended transactions as non-recommended,” officials write.

Another controversial section of the proposed rule would require principals to review transactions within 7 days.

Many commenters told FINRA that the original 7-day time limit was unrealistic.

Now, “FINRA is proposing to modify the beginning of the period within which the principal must review and determine whether to approve or reject the application,” officials write. “Under the proposal, the period would begin to run not from the date of the customer’s signature, but from the date when the firm’s office of supervisory jurisdiction receives a complete and correct copy of the application.”