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February 28, 2019 at 02:36 PM
A group for state securities regulators says the fact that groups like the American Council of Life Insurers (ACLI) have praised the U.S. Securities and Exchange Commission’s proposed sales standards regulation is a bad sign.
Michael Pieciak, president of the North American Securities Administrators Association Inc., (NASAA) says the SEC should use its “Reg BI” project to reduce conflicts of interest, and to push financial services product makers and sellers away from use of both cash and non-cash sales incentives.
“The commission should not emphasize how industry can continue business as usual and yet comply with the rule,” Pieciak writes in a comment letter submitted on behalf of NASAA. “That is the wrong message to send if the goal here is to enact a standard that eliminates and mitigates conflicts such that investors get the maximum benefit of every dime they save and invest.”
ACLI says in a response that NASAA is misrepresenting ACLI’s pro-consumer position.
(Related: SEC, DOL Share Details on Plans for Advice Standards)
ACLI “supports rules requiring all financial professionals, when making a recommendation, to act in the consumer’s best interest — with care, skill, prudence, and diligence — based on the consumer’s financial needs and objectives,” the group says. “Financial professionals also support requirements to avoid or reasonably manage conflicts of interest through increased transparency.”
The History
The National Association of Insurance Commissioners has adopted two major sets of annuity sales standards over the years: the NAIC Suitability in Annuity Transactions Model and Regulation and the NAIC Annuity Disclosure Model Regulation.
The SEC began work on a retirement product sales standards project in 2008.
The U.S. Department of Labor completed work on a fiduciary rule standard of its own under the administration of former President Barack Obama. The administration of President Donald Trump let that regulation die in mid-2018. DOL officials are now working on a new version of the regulation.
The SEC released the Reg BI sales standard proposal, which calls for affected product providers and sellers to work in the best interest of investors, in April 2018.
The NASAA Perspective
Pieciak writes in the NASAA letter that the offering expenses for products such as variable annuities can be as high as 15%. He says that, in 2016, while the old DOL fiduciary rule project was still alive, variable annuity offering expenses fell by as much as 50%.
