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Life Groups Eye Final Massachusetts Fiduciary Rule Warily

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Massachusetts officials have cut the two direct references to sales of insurance products out of the final version of the state’s new fiduciary rule.

The American Council of Life Insurers (ACLI) and the Insured Retirement Institute (IRI) are holding off on declaring victory,


  • Links to the original proposal and related documents, including comments, are available here.
  • Links to the final version, and related documents, are available here.

ACLI President Neely said in a statement that the ACLI is reviewing the regulation.

“Our goal, in Massachusetts and elsewhere, is for small and moderate savers to maintain access to the financial guidance and protection they want and need,” Neely said.

Jason Berkowitz, IRI’s chief legal and regulatory affairs officer, said IRI is reviewing the regulation with IRI members to determine the full meaning of the regulation, and its potential effects.

“Broadly, we remain concerned that the Massachusetts regulation will limit consumers and investors of their choice of investment professional and of products that are important to retirement planning and financial well-being,” Berkowitz said.

The U.S. Securities and Exchange Commission is planning to implement its Regulation Best Interest sales standard regulation June 30.

IRI thinks states should give Reg BI time to work before considering the idea of developing new regulations, Berkowitz said.

Berkowitz said the National Association of Insurance Commissioners (NAIC) recently approved a new best interest model regulation for annuity sales.

(Related: Full NAIC Adopts Annuity Suitability Model Update)

“This model regulation aligns well with Reg BI, and IRI urges all states to adopt it quickly,” Berkowitz said. “Combined, the SEC and NAIC regulations offer substantial enhancements to consumer protections, new compliance requirements for financial firms and stringent enforcement mechanisms.”

The Massachusetts Fiduciary Rule

Massachusetts Secretary of State William Galvin was a strong supporter of the U.S. Department of Labor’s Obama-era fiduciary rule effort. He began developing a state-level version when litigation, and lack of support from the Trump administration, blocked implementation of the federal regulation.

One provision in the Massachusetts regulation prohibits use of sales contests.

The state will start enforcing the regulation Sept. 1, 2020, according to the regulation text.

The NAIC created its annuity suitability model update in part because of annuity market players’ concerns that Massachusetts, New York and other states would set their own, conflicting annuity sales standards.

Birny Birnbaum, executive director of the Center for Economic Justice, has predicted that the NAIC’s new model regulation will create confusing new forms and disclosures without doing much to set new compensation rules or other new rules for annuity sellers.

Insurance and the Massachusetts Fiduciary Rule

Barbara Roper, director of investors protection for the Consumer Federation of America, said last week that the deletions of the references to insurance in the fiduciary regulation weaken the regulation.

(Related: Massachusetts Finalizes Fiduciary Rule; Consumer Group ‘Disappointed’ With Changes)

Massachusetts officials say in the preamble, or official introduction, to the state’s new final regulation that they took out references both to insurance and to commodities because “multiple commenters wrote that variable annuities and insurance products are excluded from the definition of ‘security,’ as defined in [state law], and that the proposal should be limited only to securities.”

— Read Warren Vows to Resurrect Obama-Era DOL Fiduciary Ruleon ThinkAdvisor.

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