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September 29, 2011 at 08:00 PM
This month, California Gov. Jerry Brown signed into law a bill that governs the selling of annuities and imposes fines and sanctions on agents who violate the requirements outlined in the legislation.
The bill, A.B. 689, was backed by the California Department of Insurance and unanimously passed both the State Senate and Assembly this spring and summer. The law is patterned on one approved by the National Association of Insurance Commissioners (NAIC). The Dodd-Frank Wall Street Reform and Consumer Protection Act advocated that states enact annuity legislation similar to that outlined in NAIC’s “Suitability in Annuity Transactions” model.
In essence, the law, which goes into effect on Jan. 1, 2012, mandates that agents verify that an annuity purchase is appropriate for a consumer based on age, income, financial objectives and other factors. Such suitability information shall be provided by the consumer. It further stipulates that an insurance producer must receive training from an insurance commission-approved entity before he or she can sell annuities.
Annuity sales by FINRA-governed broker-dealers that comply with the suitability and supervision conditions of FINRA are “deemed to satisfy” the requirements of the law.
