Iowa State Flag painted on brick wall (Image: Thinkstock) (Image: Thinkstock)

Iowa has proposed a best-interest standard requiring financial professionals to act in the best interest of clients.

The plan, released by the Iowa Insurance Division, is based on the model regulation approved by the National Association of Insurance Commissioners earlier this year and requires annuity agents and broker-dealers and their reps to act in the best interest of their customers.

The Iowa Insurance Division is a member of the NAIC and North American Securities Administrators Association.

The Insurance Retirement Institute (IRI) said Tuesday that while it supports the Iowa regulation, the annuity group is concerned about “potential inconsistencies” between the Securities and Exchange Commission’s Regulation Best Interest and Iowa’s proposed best interest standard for securities professionals.

Jason Berkowitz, IRI chief legal and regulatory affairs officer, said Iowa’s proposal aims to align with Reg BI, “but IRI and our members are concerned about a few subtle but important distinctions between the two.”

George Michael Gerstein, partner at Stradley Ronon in Washington, agreed that the Iowa proposal “seeks to proximately harmonize with Regulation Best Interest.”

In comments filed with the Iowa Insurance Division, IRI stated that the inconsistencies between federal rules and Iowa’s proposal could be addressed by a clear exception or safe harbor for federally regulated broker-dealers and registered reps acting in compliance with Reg BI, which has a June 30 compliance date.

“In our view, this would be the most clear and direct way to avoid duplication and inconsistency,” Berkowitz said.

Broker-dealers and registered reps would also not have sufficient time to appropriately comply with the new rules, IRI said, as its requirements and conditions “are complex and would require significant information technology re-design and build outs to support.”

IRI asked that the plan be revised to provide “sufficient time for firms and financial professionals to develop and implement the policies, procedures, and systems changes necessary to achieve compliance.”

Also, due to the ongoing challenges related the COVID-19 pandemic, IRI urged the Iowa agency to extend the comment period and postpone the public hearing for 90 days.

A public hearing is currently scheduled for April 28.

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