628.347 Best interest in annuity transactions.

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

(1)Definitions. In this section:

(a)“Annuity” means an annuity that is an insurance product that is individually solicited, whether the product is classified as an individual or group annuity.

(ac)“Cash compensation” means any discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received in connection with the recommendation or sale of an annuity by an insurance intermediary from an insurer or other insurance intermediary or directly from the consumer.

(ae)“Comparable standards” means:

1. With respect to broker-dealers and registered representatives of broker-dealers, the applicable rules of the federal securities and exchange commission and FINRA pertaining to best interest obligations and supervision of annuity recommendations and sales, including Regulation Best Interest and any amendments or successor regulations thereto.

2. With respect to investment advisers registered under federal or state securities law and investment adviser representatives, the fiduciary duties and other requirements imposed on the investment adviser or investment adviser representative by contract or under the Investment Advisers Act of 1940 or applicable state securities law, including the federal form ADV and applicable interpretations.

3. With respect to plan fiduciaries and fiduciaries described in par.

(ak)3. , the duties, obligations, prohibitions, and other requirements attendant to such status under the Employee Retirement Income Security Act of 1974 or the Internal Revenue Code.

(ag)“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 all of the following:

1. Age.

2. Annual income.

3. Financial situation and needs, including debts and other obligations.

4. Financial experience.

5. Financial objectives.

6. Intended use of the annuity.

7. Financial time horizon.

8. Existing assets and financial products, including investment, annuity, and insurance holdings.

9. Liquidity needs.

10. Liquid net worth.

11. Risk tolerance, including willingness to accept non-guaranteed elements in the annuity.

12. Tax status.

13. Insurance needs.

14. Financial resources used to fund the annuity.

(ak)“Financial professional” means an insurance intermediary who is regulated and acting as any of the following:

1. A broker-dealer registered under federal or state securities law or a registered representative of such a broker-dealer.

2. An investment adviser registered under federal or state securities law or an investment adviser representative associated with such an investment adviser.

3. A plan fiduciary, as defined in 29 USC 1002 (21), or a fiduciary, as defined in section 4975

(3)of the Internal Revenue Code.

(am)“FINRA” means the Financial Industry Regulatory Authority or a succeeding agency.

(ar)“Material conflict of interest” means a financial interest of an insurance intermediary in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation, but does not include cash compensation or noncash compensation.

(aw)“Noncash compensation” means any form of compensation that is not cash compensation, including health insurance, office rent, office support, and retirement benefits.

(ax)“Non-guaranteed elements” means the premiums, credited interest rates, benefits, values, dividends, noninterest based credits, and charges, along with the elements of formulas used to determine any of these items, that are subject to company discretion and are not guaranteed at issue. An element is a non-guaranteed element if any non-guaranteed elements are used in its calculation. For purposes of this subsection, credited interest rates include any bonus.

(b)“Recommendation” means advice provided by an insurance intermediary, or an insurer if no intermediary is involved, to an individual consumer that results in, or was intended to result in, the purchase, exchange, or replacement of an annuity in accordance with that advice, except that “recommendation” does not include general communication to the public, generalized customer service assistance or administrative support, general educational information and tools, prospectuses, and other product and sales materials.

(d)“Replacement” means a transaction in which a new annuity is to be purchased and it is known, or should be known to the proposing insurance intermediary, or to the proposing insurer if no intermediary is involved, that by reason of the transaction an existing policy or contract has been or is to be any of the following:

1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated.

2. 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.

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

4. Reissued with a reduction in cash value.

5. Used in a financed purchase.