Regulatory Updates Archives

The New Best Interest Standard for Annuity Sales: An Overview of Revisions to the NAIC’s Model Regulation #275

Download as PDF In February 2020, the National Association of Insurance Commissioners (NAIC) approved revisions to its Suitability in Annuity Transactions Model Regulation (#275). The revised regulation requires that all annuity recommendations by producers and insurers meet a “best interest” standard. Under the new model regulation, insurance producers and carriers may not place their financial interests ahead of the consumer’s interest when recommending an annuity product. Furthermore, insurers are required to establish and maintain a system to supervise producer recommendations, so the insurance needs and financial objectives of consumers are addressed effectively. The new model also prohibits an insurer from […]

Regulatory Insights Regarding Compliance Assessments of Regulation Best Interest and Form CRS

These are certainly interesting days. So much is taking the attention of compliance professionals. By now everyone has implemented their business continuity plans (BCP) and likely made modifications to them here and there as the true test of these plans has been realized. BCP has now become yet another compliance ball to juggle for the foreseeable future. BCP recordkeeping will be important so be sure to track as you go. Regulators are certain to ask about this in upcoming exams. Now that everyone is settled into their temporary work environments and any BCP gaps have been shored up, the looming […]

CE Council Fall 2019 Firm Element Advisory Topics

Every year, RegEd reviews the latest guidance on CE Council Firm Element topics. Several times a year, the CE Council, established by FINRA to oversee the continuing education rules, writes the regulatory element exams and issues guidance on what they consider appropriate FE training topics. Following are some highlights of new or updated topics as they appear in the recent Fall Advisory. Alternative Investments Digital Assets: Updated for Reg. Notice 19-24: Encourages firms to keep FINRA abreast of their activities related to digital assets. Cryptocurrencies: An alert to warn investors to be cautious when considering shares of companies that tout […]

Observations From FINRA’s January 2020 Disciplinary Actions Report

Outside business activities and private securities transactions were a focus of FINRA’s January 2020 Disciplinary Actions Report with at least nine (9) cases being cited within the report. Several registered persons were sanctioned for failure to notify and obtain prior written approval from their member firm before engaging in an outside business activity or private securities transactions. Those who failed to cooperate with FINRA’s investigation by refusing to provide on-the-record testimony have been barred from the industry. For those who did cooperate in the FINRA investigation, all but one received fines. Fines ranged from $10,000 to $30,000. (A fine was […]

BREAKING: NAIC Adopts a Best-Interest Standard for Annuity Sales

February 13, 2020—This afternoon, the National Association of Insurance Commissioners (NAIC) voted to recommend that the states amend their annuity sales regulations to require insurance agents to “act in the best interest of the consumer when making a recommendation of an annuity.” The action came in the form of an amendment to the NAIC’s 2010 Suitability in Annuity Transactions Model Regulation, which was adopted by 45 states and the District of Colombia in the wake of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The new best-interest standard requires insurance agents to exercise a greater degree of care […]

Form CRS: An Overview of the SEC-Mandated Customer Relationship Summary Due June 30, 2020

About Form CRS In June 2019, the SEC adopted requirements (SEC Release 34-86032) for registered investment advisers, broker-dealers, and dual-registrants that do business with retail investors to file Form CRS (customer relationship summary). Form CRS is intended to inform retail investors about: The types of client/customer relationships and services the firm offers; Fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services; Whether the firm and its financial professionals currently have reportable legal or disciplinary history; How to obtain additional information about the firm. Form CRS applies to registered investment advisers, broker-dealers, and dual […]

SEC and FINRA Exam Priorities to Include Firms’ AML Compliance Programs, Including Policies and Procedures

SEC’s Office of Compliance Inspections and Examinations (OCIE) has issued its examination priorities for 2020. According to the document, OCIE will assess the adequacy of firms’ AML compliance programs, including relevant policies and procedures. AML Compliance was also cited by FINRA as an area of focus in its recent 2020 Risk Monitoring and Examination Priorities Letter. “The Bank Secrecy Act requires financial institutions, including broker-dealers and investment companies, to establish anti-money laundering (AML) programs. These programs must, among other things, include policies and procedures reasonably designed to identify and verify the identity of customers and beneficial owners of legal entity customers…Given the importance […]

FINRA Priorities Letter Highlights Customer Communications as the Subject of Heightened Focus for 2020

FINRA’s 2020 Risk Monitoring and Examination Priorities Letter serves to document areas of emphasis for the coming year, which firms may consider for opportunities to improve their compliance and supervisory programs. Among the highlights in the 2020 letter is an emphasis on firms’ compliance with obligations relating to FINRA Rule 2210 (Communications with the Public), including their marketing, advertising and sales materials. “FINRA will review how firms review, approve, supervise and distribute retail communications regarding private placement securities via online distribution platforms, as well as traditional channels.”– FINRA 2020 Risk Monitoring and Examination Priorities Letter Learn how leading firms partner with RegEd […]

SEC’s 2020 Examination Priorities Demonstrate a Continued Focus on Conflicts of Interest, Including Outside Business Activities

SEC’s Office of Compliance Inspections and Examinations (OCIE) has issued its examination priorities for 2020. According to the report, OCIE will continue its focus on the protection of retail investors, including seniors and those saving for retirement. Examinations in these areas will include reviews of disclosures relating to fees, expenses, and conflicts of interest. “Registered firms must effectively implement controls and systems to ensure disclosures are made as required and that a firm’s actions match those disclosures… Examinations will relatedly focus on registered firms’ disclosures and supervision of outside business activities of its employees and associated persons, and any conflicts that may […]

Key Takeaways: FINRA’s 2019 Report on Examination Findings and Observations

On October 16, 2019, FINRA published its 2019 Report on FINRA Examination Findings and Observations. This report is a useful resource for firms to leverage to improve their compliance and risk management programs. One of the findings in the report pertains to failure to effectively monitor for and react to regulatory changes. Firms are required to review regulatory changes against their supervisory systems, including their written supervisory procedures and training programs. FINRA found that some firms did not adequately respond to recent regulatory changes such as FinCen’s new Customer Due Diligence (CDD) obligations and requirements around Financial Exploitation of Specified […]

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