20-1243. Definitions

651 words·~3 min read·/az/title-20/20-1243

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

In this article, unless the context otherwise requires:

1. "Annuity" means an annuity that is individually solicited, whether the product is classified as an individual or group annuity.

2. "Business entity" has the same meaning prescribed in section 20-281.

3. "Cash compensation" means any discount, concession, fee, service fee, commission, sales charge, loan, override or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer or intermediary or directly from the consumer.

4. "Consumer profile information" means information that is reasonably appropriate to determine whether a recommendation addresses the consumer's financial situation, insurance needs and financial objectives, including at least the following:

(a)Age.

(b)Annual income.

(c)Financial situation and needs, including debts and other obligations.

(d)Financial experience.

(e)Insurance needs.

(f)Financial objectives.

(g)Intended use of the annuity.

(h)Financial time horizon.

(i)Existing assets or financial producers, including investment, annuity and insurance holdings.

(j)Liquidity needs.

(k)Liquid net worth.

(l)Risk tolerance, including willingness to accept nonguaranteed elements in the annuity.

(m)Financial resources used to fund the annuity.

(n)Tax status.

5. "Continuing education credit" means one continuing education credit hour as defined in section 20-2901.

6. "Continuing education provider" means an individual or entity that is approved to offer continuing education courses pursuant to chapter 18 of this title.

7. "FINRA" means the financial industry regulatory authority or a succeeding agency.

8. "Insurer" has the same meaning prescribed in section 20-104.

9. "Intermediary" means an entity that is contracted directly with an insurer or with another entity that is contracted with an insurer to facilitate the sale of the insurer's annuities by producers.

10. "Managing general agent" has the same meaning prescribed in section 20-311.

11. "Material conflict of interest":

(a)Means a producer's financial interest in the sale of an annuity that a reasonable person would expect to influence the impartiality of the producer's recommendation.

(b)Does not include cash compensation or noncash compensation.

12. "Noncash compensation" means any form of compensation that is not cash compensation, including health insurance, office rent, office support and retirement benefits.

13. "Nonguaranteed elements" means the premiums, credited interest rates including any bonus, benefits, values, dividends, noninterest based credits, charges or elements of formulas used to determine any of these that are subject to company discretion and are not guaranteed at issue. An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in its calculation.

14. "Producer":

(a)Means an insurance producer as defined in section 20-281.

(b)Includes an insurer where no producer is involved.

15. "Recommendation":

(a)Means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, exchange or replacement of an annuity pursuant to that advice.

(b)Does not include general communication to the public, generalized customer service assistance or administrative support, general education information and tools, prospectuses or other product and sales materials.

16. "Replacement" means a transaction in which a new annuity is to be purchased and it is known or should be known to the proposing producer or to the proposing insurer, whether or not a producer is involved, that by reason of the transaction, an existing annuity or other insurance policy has been or is to be any of the following:

(a)Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated.

(b)Converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values.

(c)Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or which benefits would be paid.

(d)Reissued with any reduction in cash value.

(e)Used in a financed purchase.

17. "SEC" means the United States securities and exchange commission.