The U.S. Securities and Exchange Commission is calling for reactions to variable annuity sales rule changes proposed by the Financial Industry Regulatory Authority.
FINRA, Washington, filed the proposed changes with the SEC in May, shortly after responding to a deluge of criticism of an earlier version of the changes by agreeing to postpone implementation.
The proposal, which would amend sections of NASD Rule 2821, would require FINRA member firms to have a principal review each transaction involving a deferred variable annuity within 7 days.
The old version of the proposal would have required principals to review all transactions–including those initiated by customers–within 7 days after customers had signed VA applications.
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Now, “FINRA is proposing to limit the rule’s application to recommended transactions,” SEC officials write in a description of the changes published in the Federal Register. “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 FINRA officials told the SEC.
“FINRA emphasizes, moreover, that members must implement reasonable measures to detect and correct circumstances when brokers mischaracterize recommended transactions as non-recommended,” officials write.
FINRA also plans to change the 7-day review requirement.
Many commenters told FINRA that requiring reviews to be completed within 7 days after customers had signed applications was unrealistic.
Now, under the new 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,” officials write.
The SEC wants members of the public to submit any comments on the proposed changes by July 1.