Editor’s note: The links to the Arizona, Iowa and Tennessee state bulletins have been updated to open directly to the original documents.
Last year, ProducersWEB ran one of my best-read articles, States are forcing insurance agents to become securities licensed. The article detailed what is known as the source-of-funds rule (SOF) and how the states of Arkansas and Iowa were using this rule to essentially force life/annuity insurance agents to become securities licensed.
What is SOF?
It is simply asking where did the money come from to fund a fixed life or annuity contract; what is the source of funds? If the money to fund a fixed insurance product came from the liquidation of stocks, mutual funds, etc., Arkansas and Iowa would say that you are violating the law if you do so without having a securities license. This includes money in IRAs.
As could be expected, the state of Tennessee is the latest one to use the SOF rule as an excuse to regulate insurance advisors. Julie McPeak, Commission Department of Commerce & Insurance for the State of Tennessee, issued an eight-page bulletin to all insurance and securities licensed advisors. To read the eight-page bulletin, please click on this link.