Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance

Reg BI Ruling Could Help Annuity Issuers, Commission-Based Agents

Your article was successfully shared with the contacts you provided.

The American Council of Life Insurers (ACLI) says a new federal appeals court ruling should help an annuity sales standard it likes spread.

A three-judge panel at the 2nd U.S. Circuit Court of Appeals ruled Friday that the U.S. Securities and Exchange Commission did have the authority to adopt Regulation Best Interest, and that Reg BI is not arbitrary and capricious.

ACLI President Susan Neely said in a statement that she believes the court made the right call. “It affirmed enhanced consumer protections,” Neely said. “The result is continued progress in safeguarding access for all consumers and securing harmonized standards across the country,”


Attorneys general from California, New York and five other states led by Democrats brought the suits. They have asserted that Reg BI fails to meet the statutory requirements set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and that the SEC should have required broker-dealers to meet the same kind of fiduciary standard that applies to investment advisers.

Judge Michael Park wrote the opinion for the panel.

All three judges were appointed to the panel by President Donald Trump.

One judge, Richard Sullivan, dissented in part, to make the case that the other judges should have been tougher on the petitioners.

The petitioners lacked any standing to bring their suit, and the other judges should not have bothered to analyze the merits of the petitioners’ arguments, Sullivan writes in a partial dissent.

The History

The new ruling is just the latest event in a long-running financial services sales standards battle.

The U.S. Department of Labor (DOL) tried, under former President Barack Obama, to impose a strict fiduciary standard on all investment advisers and broker-dealers, and implementation guidelines that could have eliminated use of sales commissions in sales of non-variable indexed annuities.

Some commenters suggested that the guidelines could eventually have eliminated use of sales commissions in sales of life insurance and traditional fixed annuities.

Life insurers sued to overturn the DOL fiduciary rule.

When  Trump became president, the federal government stopped defending the DOL fiduciary rule, and it died in court.

The Labor Department has been working on a new sales standard regulation, and observers are saying a draft could come out this week.

The NAIC Model

The National Association of Insurance Commissioners (NAIC) has developed a model standard for annuity sellers that wraps around Reg BI.

Financial planner groups and investor groups have been skeptical about Reg BI and the NAIC model. Birny Birnbaum, the executive director of the Center for Economic Justice, has called the NAIC model “one of the most anti-consumer actions the NAIC has taken.”

Iowa and Arizona have both adopted the NAIC model as their standard for annuity sales.

The ACLI says in its comments on the new court ruling that, thanks to the actions of the NAIC, Iowa and Arizona, “a national standard to protect consumers is emerging.”

— Read Arizona Adopts Best-Interest Standard for Annuity Saleson ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.