Having survived a wind storm and a semi-annual procedures update process that nearly killed me (the update, not the wind storm), I am resurfacing to provide a few reminders:
1. R.I.P. Webcasts: After March 31 you will no longer be able to view Webcasts on FINRA's website. All of the prior content is included in other offerings, such as Video E-Learning or plain-old E-Learning courses. But, well, you have to pay for those. Webcasts were free. All's fair in love, war, and a crappy economy.
2. TRACE: Agency Debt Securities became TRACE eligible on March 1, as did certain primary market transactions (those that qualify as list or fixed price offering or takedown transactions). See Notice 09-57.
3. New Capital Compliance Rule: As of February 8, the new financial responsibility rules became effective (FINRA Rules 4110, etc.). Many of the restrictive rules apply to "carrying or clearing firms"--but look at the footnote in the rule and you'll see that they also apply to firms with "k2i" accounts--you know, the account you have set up so you can receive checks from customers for mutual fund and other purchases? This new rule requires, for instance, that your firm must obtain prior written approval before withdrawing any capital that exceeds10 percent of the firm’s excess net capital in any rolling 35-calendar-day period. This includes withdrawals of profits, routine dividends and similar distributions. Wow. For small business owners who take profits this way, this rule seems extremely onerous. See Notice 09-71.
As for the answers to these extremely logical questions: 1) "To whom do firms request approval?" and 2) "How long does FINRA have to grant approval?", well, the answers were not easy to find... in summary: 1) Eventually there will be an electronic request process on Gateway, but for now fax or email your District Office, and 2) In your communication to the District, inform them that you will be making the distribution in x days in the absence of a response from them. In the published Response to Comments on these rules, it states,"[...] requests for withdrawals can be handled in a routine manner and that decisions typically would be issued in approximately three business days": how's that for clarity?!
[Allow me for a moment to express frustration with FINRA for making a Rule effective without having a mechanism in place for allowing firms to comply with the Rule--and for not providing this basic, administrative information to all firms in an easily accessible, publicly-available place (like the Notice??), rather than burying (half of) it in filing documents not regularly visited by most compliance staff. And what-up with making pleasant, good-intentioned, helpful folks like moi feel wrong for asking presumably easy questions and expecting to get answers? What's wrong with regulators saying, "I don't know" or "We're still working on that" or "Three days, but sorry, we didn't put that in the Notice"? ... ugh. P.S. I'm thankful to Estee Dorfman Foster (CPA/outsourced FINOP) for her assistance in finding answers.]
4. Variable Annuity Rules: As of February 8, the formerly-delayed parts of FINRA Rule 2330 became effective. Principals now have 7 days to review recommended v/a purchases and exchanges. There are changes to customer funds rules, too--because if you held a customer's check during that 7 days, you would have otherwise broken SEC customer funds rules. Check out Notice 10-05 for fresh guidance on these changes.
5. AML Madness: FINRA released its updated AML Small Firms Template in January... it is full of wonderfully--wait, not wonderfully, but rather, dreadfully--legalistic text changes that would drive any technical writer crazy. I'm proud to say my template is still better than theirs. You should look at your AML program and FINRA's updated template to assess the time it will take to make corresponding changes; then you should drown your sorrows in a stiff drink (or call me!). See here for a link to the template in Word format. Oh and remember that as of January 1, you may no longer have someone in your small firm conduct annual independent testing if that person has a conflict of interest (you used to be able to rely on a loophole--it is gone). For this rule change, see Notice 09-60.
6. 3012/3130--Testing & Verification: For most of you, it's that time of year again--in fact, this is the 5th time you have to follow these rules since inception! This should be easy by now...You have to test and verify your supervisory system. And write a report. And write another report about the process of writing the report. And sign a certification. And put the whole shebang in a file drawer and hope no-one ever asks for it (...but they will). Remember, your reports and certifications are due w/in 12 months of last year's. It's not a calendar year requirement--it's every 12 months by the anniversary. Here is a link to regulatory information on supervisory controls.
7. Short Sales Rule Change: Mary over at SEC approved a change to Reg. SHO, affectionately called the "alternative uptick rule" that restricts short selling in stocks that have dropped 10% in price in one day. Effective Date: May 10, 2010; Compliance Date: November 10, 2010. See link to Reg SHO change for 334 pages of bedtime reading. I'm getting sleepy just thinking about it.
8. TARP Warrants: How do we describe these nouvelles choses? Warrants (that's what they're called)? Options (they're priced like options)? Corporate securities (they're issued by corp's)? Government securities (they were issued to Uncle Sam--is he backing them in the secondary market)? Ask 4 people and you'll get 4 different answers (ask me and you'll get a frustrated shrug of confusion and disgust). Stay tuned for the answer.
FINRA has released its March 1 examination priorities. Review it and weep. You have work to do.
Your Moment of Optimism: 17 days till Spring!
Showing posts with label deferred variable annuities. Show all posts
Showing posts with label deferred variable annuities. Show all posts
Wednesday, March 3, 2010
Thursday, July 2, 2009
Useful Information on a Rainy Day
I walked to my NEW office this morning without drowning in a puddle. High of 61 today with downpours. Feel sorry for us, here in coastal NH. We deserve your pity.
Few things:
1. Remember the FTC Red Flags Rule? FINRA released its brand new written ID Theft Prevention Program template!--and it has an acronym: ITPP! This is great. Thank-you, FINRA. Now all you small firms that have no idea what this rule is all about, and believe that it is completely duplicative with AML and unnecessary, given that you are a tiny shop that does not use credit reports, does not provide debit cards or checkwriting, and does not extend credit (but wait, you have a clearing firm and your clients may open margin accounts through your firm), can create an ITPP without much effort. And the better news is, if FINRA examines for compliance with this rule like it did with AML, you will have years before your written program actually has to be fully customized and implemented. FTC enforcement of the Red Flags Rule begins August 1, 2009. So get going. Here is the link to the template, courtesy of FINRA:
www.finra.org/customerprotection/redflags.
2. As of August 17 you have to provide a new disclosure to customers. New FINRA Rule 2267 is based on old NASD Rule 2280 (Investor Education and Protection). The old rule applied only to firms carrying customer accounts. Now it applies to everyone. BUT: if your firm has an clearing firm that will make the disclosures for you, you're all set (confirm this with them, ok?). If you have other (or only) customers that aren't serviced by a clearing firm and that don't, for instance, receive statements or confirms, then your firm will have to make the disclosures. An example would be an 'application-way' shop that processes MF/VA applications and does not have brokerage accounts. I'm guessing PP/M&A firms are in this category, too, but let's not expect FINRA to be clear on that (you know how I feel about this subject, right?).
So, if all your customers are receiving statements, etc. from the clearing firm, make sure they'll include the disclosures annually to your customers.
Otherwise, you have to provide the disclosures (annually if you carry accounts). If you don't carry accounts, as I desdcribed above, or have some customers not receiving statements, you have to provide the disclosures at or prior to the time of the customer’s initial purchase, in lieu of once every calendar year.
Disclosures may be provided electronically (yahoo).
Here is what you have to disclose:
1. FINRA Broker Check Hotline Number -- (800) 289-9999;
2. FINRA Web site address -- www.finra.org; and
3. A statement as to the availability to the customer of an investor brochure that includes information describing FINRA Broker Check. ...Harder than it sounds. Here's what I recommend: "You may find information about Broker Check online by visiting this link http://www.finra.org/web/groups/industry/@inv/@tools/documents/industry/p009888.pdf or by calling the Hotline number and requesting a hard copy via mail."
Here's what FINRA says about the due date: "Any firm subject to NASD Rule 2280 that complies with its annual (calendar year) mailing requirement on or after January 1, 2009 but prior to the August 17, 2009 effective date of FINRA Rule 2267 will be deemed to have complied with FINRA Rule 2267 for the 2009 calendar year."
So check with your clearing firm to see it they will have complied with old 2280 by 8-17; if not, you're not in compliance. For other firms (see above), start making the disclosures for new accounts. And what the heck, if you send out an annual disclosure notice with other things, like privacy policy and SIPC info, why not include this one, too?
3. Rule 2821 on Variable Annuities--they FINALLY finalized the rule. And the great news is, they took out that requirement to consider ALL deferred V/A purchases and exchanges as 'recommended.' The rule changes also clarify the 7-day review/approval process and funds transfers in that 7-day period. It's good, and the Notice is written well. Look it up: Notice 09-32 is at http://www.finra.org/Industry/Regulation/Notices/2009/P118955. BUT DON'T start enforcing the rule yet. It's effective 2-8-10. I have a call into FINRA about whether optional compliance before then is okay, but I haven't heard back yet :( . In the mean time, you have the usual 24 hour turnaround period to move funds out and approve the business.
Looking out my window: still raining.
Few things:
1. Remember the FTC Red Flags Rule? FINRA released its brand new written ID Theft Prevention Program template!--and it has an acronym: ITPP! This is great. Thank-you, FINRA. Now all you small firms that have no idea what this rule is all about, and believe that it is completely duplicative with AML and unnecessary, given that you are a tiny shop that does not use credit reports, does not provide debit cards or checkwriting, and does not extend credit (but wait, you have a clearing firm and your clients may open margin accounts through your firm), can create an ITPP without much effort. And the better news is, if FINRA examines for compliance with this rule like it did with AML, you will have years before your written program actually has to be fully customized and implemented. FTC enforcement of the Red Flags Rule begins August 1, 2009. So get going. Here is the link to the template, courtesy of FINRA:
www.finra.org/customerprotection/redflags.
2. As of August 17 you have to provide a new disclosure to customers. New FINRA Rule 2267 is based on old NASD Rule 2280 (Investor Education and Protection). The old rule applied only to firms carrying customer accounts. Now it applies to everyone. BUT: if your firm has an clearing firm that will make the disclosures for you, you're all set (confirm this with them, ok?). If you have other (or only) customers that aren't serviced by a clearing firm and that don't, for instance, receive statements or confirms, then your firm will have to make the disclosures. An example would be an 'application-way' shop that processes MF/VA applications and does not have brokerage accounts. I'm guessing PP/M&A firms are in this category, too, but let's not expect FINRA to be clear on that (you know how I feel about this subject, right?).
So, if all your customers are receiving statements, etc. from the clearing firm, make sure they'll include the disclosures annually to your customers.
Otherwise, you have to provide the disclosures (annually if you carry accounts). If you don't carry accounts, as I desdcribed above, or have some customers not receiving statements, you have to provide the disclosures at or prior to the time of the customer’s initial purchase, in lieu of once every calendar year.
Disclosures may be provided electronically (yahoo).
Here is what you have to disclose:
1. FINRA Broker Check Hotline Number -- (800) 289-9999;
2. FINRA Web site address -- www.finra.org; and
3. A statement as to the availability to the customer of an investor brochure that includes information describing FINRA Broker Check. ...Harder than it sounds. Here's what I recommend: "You may find information about Broker Check online by visiting this link http://www.finra.org/web/groups/industry/@inv/@tools/documents/industry/p009888.pdf or by calling the Hotline number and requesting a hard copy via mail."
Here's what FINRA says about the due date: "Any firm subject to NASD Rule 2280 that complies with its annual (calendar year) mailing requirement on or after January 1, 2009 but prior to the August 17, 2009 effective date of FINRA Rule 2267 will be deemed to have complied with FINRA Rule 2267 for the 2009 calendar year."
So check with your clearing firm to see it they will have complied with old 2280 by 8-17; if not, you're not in compliance. For other firms (see above), start making the disclosures for new accounts. And what the heck, if you send out an annual disclosure notice with other things, like privacy policy and SIPC info, why not include this one, too?
3. Rule 2821 on Variable Annuities--they FINALLY finalized the rule. And the great news is, they took out that requirement to consider ALL deferred V/A purchases and exchanges as 'recommended.' The rule changes also clarify the 7-day review/approval process and funds transfers in that 7-day period. It's good, and the Notice is written well. Look it up: Notice 09-32 is at http://www.finra.org/Industry/Regulation/Notices/2009/P118955. BUT DON'T start enforcing the rule yet. It's effective 2-8-10. I have a call into FINRA about whether optional compliance before then is okay, but I haven't heard back yet :( . In the mean time, you have the usual 24 hour turnaround period to move funds out and approve the business.
Looking out my window: still raining.
Tuesday, April 22, 2008
Deferred Variable Annuities--The New Rule
Hi. And Happy Earth Day. While you're in your backyard digging holes and planting things, perhaps include this information (-'er, I don't mean bury it--I mean, plant it in your mind so that it may bloom and grow).
Rule 2821 is effective May 5. But not the whole thing: paragraphs (c) and (d) have been put on hold indefinitely, pending SEC's response to FINRA's forthcoming amendments (that's some kinda vague, isn't it?). What this means is: your Reps have to perform and document a suitability analysis for def. v/a purchases and exchanges, but you as Principal don't have to follow the new approval rules--you don't have to make a suitability determination, too. At least not yet. You still have to approve the business like you've always done. The other part of the Rule that will be effective May 5 is the training part: you have to train your reps on the new Rule and on def. variable annuities in general, along with the specific products they offer. I have a feeling you're doing this already for C/E purposes. But be sure to train, by May 5, the reps on the specifics of their new obligations under the Rule; also train them on any new forms you've devised to help them document their suitability analysis. Lastly, interestingly, your firm has to comply with these effective parts of the Rule, but you don't have to have written procedures in place describing the compliance elements you're adopting. That paragraph (d) has been delayed. If you're in the process of updating your WSP manual, or will be soon, it wouldn't hurt to go ahead and include new procedures: you can revise them later, if necessary.
I listened in on the Def. V/A Phone-In Workshop last Friday. Here are the notes I typed up. My apologies for the tone of brevity. FYI: I didn't learn a lot on this phone call and found that the "cya" and "not our job" messages were loud and clear, as usual.
Notes on Rule 2821: Deferred Variable Annuities Phone-In Workshop
April 18, 2008
Presenters: Larry Kosciulek and Andy Favret
1400 participants signed up for call
Questions submitted in advance; no live questions from listeners
(cya introduction: FINRA doesn’t endorse any compliance practice)
Link to materials: http://www.finra.org/EducationPrograms/Materials/p038332
1. UPDATE:
Paragraphs (c) and (d) –effectiveness delayed indefinitely. See rule filing notice sent April 17 by Finra: http://www.finra.org/RulesRegulation/RuleFilings/2008RuleFilings/P038354
2. APPLICABLE TO:
Rule applies to stand-alone purchase of def. v/a and exchange of one for another. Includes purchases in IRA accounts, not transaction in employer-sponsored plans. Does not apply to re-allocation in sub-accounts or to subsequent investments in sub-accounts. Does not apply to recommendations to SELL v/a’s (but other, general rules such as Communications with the Public--Rule 2210--apply to these transactions). Rule would apply to specific recommendations made to individual plan members of an employer-sponsored plan.
Rule applies to recommended transactions (not all communications constitute recommendations)—but the text of Paragraph (c) (that may be amended and is not now effective) states that a principal must treat “all transactions as if they have
been recommended for purposes of this principal review” and must make a suitability determination… FINRA is considered truly making the Rule apply ONLY to recommendations.
3. SCOPE:
Rule pertains to:
Reps who recommend these transactions
Principal who approve them
WSP’s
Training
4. REPS:
When recommending purchase or exchange, must get info and review existing assets. Effective date: May 5
Q: What does “liquidity needs” mean? What info is required?
A: See 2821(b)(2). Liquidity needs is not defined, but age, income, net worth, dependents, short term cash needs for homes, education, etc. are factors to consider.
IRA funds are not liquid assets—because they require a penalty/fee to tap.
Information must be captured so it can be reviewed: no special form is required under the Rule.
Q: Document and sign determinations: what form to use? Is the intent: to provide rationale for transaction or to give disclosure to client?
A: Form should be firm’s choice as appropriate. This is not about disclosure to customer; it’s about suitability.
Remember, investment time horizon—these securities are long term investments. Access to funds before end of surrender or waiting period is costly.
Rep must determine suitability based on factors listed in rule. Must document and sign some record to show this.
Exchanges: primary purpose cannot be RR’s profit. Consider:
Triggers surrender charge?
Lose benefits, increase in fees/charges?
Compare fees/etc. of both
Does customer benefit?Has customer done exchange w/in last 36 months?
Q: The 36-month exchange reference—does it refer to the particular customer’s account?
A: No, in any account w/in 36 months.
Q: Does customer have to sign acknowledgement of disclosures?
A: No but firm may decide to require this.
Remember: ‘Intended use’—important to suitability consideration. Need for cash---not a good reason to buy v/a.
Q: Is an exchange within 36 mos. a call to action?
A: No, an exchange with a customer having done an exchange w/in the last 36 months may not necessarily be prohibited. This information is just part of the necessary background information used to make suitability determination. A yes answer may end up triggering more supervision or a closer look at the proposed transaction.
5. PRINCIPAL:
Paragraph (c) of Rule—Principal must review before sending to insurance co/vendor for processing. This paragraph is not in effect; delayed effective date.
Discussing it anyway….
Q: If customer sends $ directly to vendor how can Principal review transaction before sending for processing?
A: Doesn’t apply to non-recommended transactions or to reinvestments.
Rule is in state of flux for now. Par. (c) will be amended and FINRA will provide guidance.
A: What about in the interim? Bet. May 5 and ultimate effective date of (c) and (d)?
No interim requirement. Keep doing what you’re doing re: Principal review… firms can adopt new procedures now if they want.
Principal doesn’t need insurance license to approve this business. 26, 24 or 9-10 license is okay.
Rule now states that Principal must approve within 7 business days of the customer signing the application. The workshop presenters said it was 7 days from the date the OSJ received the completed application. Assumption: clarification is forthcoming with Rule change.
Application must be sent by next business day after Principal approval (noon on Day 8 at latest)
Firms can hold customer checks pending Principal review—relief from net capital reserve and n/c rules. “Promptly transmit” is waived if 2821 is met.:
Copy check, record date rec’d and date transmitted to vendor or returned to customer. (i.e., on checks rec’d forwarded blotter)
$ must be sent by noon next day after approval.
Possible Rule change about use of suspension a/c’s at ins. companies. This would allow funds to be send pending Principal approval.
6. WSP:
Although this part of the Rule has been delayed, it (paragraph (d)) will not change. Firm will be required to have written procedures.
Automated systems to review/approve v/a business is NOT permitted.
7. TRAINING:
Training program must be in effect by May 5.
Training required on more than just general characteristics--on specific products offered by firm.
Rely on 3rd parties, such as wholesalers, ins. co’s? Okay, but firm ultimately responsible.
Train all reps on 2821 by May 5.
Can put in c/e firm element, but some training should be provided by May 5.
Use webcasts and e-learning to provide training.
For wholesalers who promote v/a products to firms—training req. does not apply (no recs to customers)
8. MISC:
Q: Offshore V/A’s—included?
A: Rule focuses on whether it’s a registered product, not if it’s offshore (no explicit answer to question)
FINRA “Relies on firms to set their own parameters for suitability”—FINRA doesn’t set.
Q: What is reasonable for procedures/disclosures?
A: Firm decides. For instance, could require customer sign-off on purchase/exchange.
Q: Does FINRA have any plans for an online tool like the Mutual Fund expense analyzer to use with V/A analysis?
A: They are exploring this.
Q: Will FINRA be providing other tools, like disclosure forms? Replacement forms?
A: No, they’re not working on this.
Workshop time estimated: 75 minutes; actual time: 50 minutes.
Rule 2821 is effective May 5. But not the whole thing: paragraphs (c) and (d) have been put on hold indefinitely, pending SEC's response to FINRA's forthcoming amendments (that's some kinda vague, isn't it?). What this means is: your Reps have to perform and document a suitability analysis for def. v/a purchases and exchanges, but you as Principal don't have to follow the new approval rules--you don't have to make a suitability determination, too. At least not yet. You still have to approve the business like you've always done. The other part of the Rule that will be effective May 5 is the training part: you have to train your reps on the new Rule and on def. variable annuities in general, along with the specific products they offer. I have a feeling you're doing this already for C/E purposes. But be sure to train, by May 5, the reps on the specifics of their new obligations under the Rule; also train them on any new forms you've devised to help them document their suitability analysis. Lastly, interestingly, your firm has to comply with these effective parts of the Rule, but you don't have to have written procedures in place describing the compliance elements you're adopting. That paragraph (d) has been delayed. If you're in the process of updating your WSP manual, or will be soon, it wouldn't hurt to go ahead and include new procedures: you can revise them later, if necessary.
I listened in on the Def. V/A Phone-In Workshop last Friday. Here are the notes I typed up. My apologies for the tone of brevity. FYI: I didn't learn a lot on this phone call and found that the "cya" and "not our job" messages were loud and clear, as usual.
Notes on Rule 2821: Deferred Variable Annuities Phone-In Workshop
April 18, 2008
Presenters: Larry Kosciulek and Andy Favret
1400 participants signed up for call
Questions submitted in advance; no live questions from listeners
(cya introduction: FINRA doesn’t endorse any compliance practice)
Link to materials: http://www.finra.org/EducationPrograms/Materials/p038332
1. UPDATE:
Paragraphs (c) and (d) –effectiveness delayed indefinitely. See rule filing notice sent April 17 by Finra: http://www.finra.org/RulesRegulation/RuleFilings/2008RuleFilings/P038354
2. APPLICABLE TO:
Rule applies to stand-alone purchase of def. v/a and exchange of one for another. Includes purchases in IRA accounts, not transaction in employer-sponsored plans. Does not apply to re-allocation in sub-accounts or to subsequent investments in sub-accounts. Does not apply to recommendations to SELL v/a’s (but other, general rules such as Communications with the Public--Rule 2210--apply to these transactions). Rule would apply to specific recommendations made to individual plan members of an employer-sponsored plan.
Rule applies to recommended transactions (not all communications constitute recommendations)—but the text of Paragraph (c) (that may be amended and is not now effective) states that a principal must treat “all transactions as if they have
been recommended for purposes of this principal review” and must make a suitability determination… FINRA is considered truly making the Rule apply ONLY to recommendations.
3. SCOPE:
Rule pertains to:
Reps who recommend these transactions
Principal who approve them
WSP’s
Training
4. REPS:
When recommending purchase or exchange, must get info and review existing assets. Effective date: May 5
Q: What does “liquidity needs” mean? What info is required?
A: See 2821(b)(2). Liquidity needs is not defined, but age, income, net worth, dependents, short term cash needs for homes, education, etc. are factors to consider.
IRA funds are not liquid assets—because they require a penalty/fee to tap.
Information must be captured so it can be reviewed: no special form is required under the Rule.
Q: Document and sign determinations: what form to use? Is the intent: to provide rationale for transaction or to give disclosure to client?
A: Form should be firm’s choice as appropriate. This is not about disclosure to customer; it’s about suitability.
Remember, investment time horizon—these securities are long term investments. Access to funds before end of surrender or waiting period is costly.
Rep must determine suitability based on factors listed in rule. Must document and sign some record to show this.
Exchanges: primary purpose cannot be RR’s profit. Consider:
Triggers surrender charge?
Lose benefits, increase in fees/charges?
Compare fees/etc. of both
Does customer benefit?Has customer done exchange w/in last 36 months?
Q: The 36-month exchange reference—does it refer to the particular customer’s account?
A: No, in any account w/in 36 months.
Q: Does customer have to sign acknowledgement of disclosures?
A: No but firm may decide to require this.
Remember: ‘Intended use’—important to suitability consideration. Need for cash---not a good reason to buy v/a.
Q: Is an exchange within 36 mos. a call to action?
A: No, an exchange with a customer having done an exchange w/in the last 36 months may not necessarily be prohibited. This information is just part of the necessary background information used to make suitability determination. A yes answer may end up triggering more supervision or a closer look at the proposed transaction.
5. PRINCIPAL:
Paragraph (c) of Rule—Principal must review before sending to insurance co/vendor for processing. This paragraph is not in effect; delayed effective date.
Discussing it anyway….
Q: If customer sends $ directly to vendor how can Principal review transaction before sending for processing?
A: Doesn’t apply to non-recommended transactions or to reinvestments.
Rule is in state of flux for now. Par. (c) will be amended and FINRA will provide guidance.
A: What about in the interim? Bet. May 5 and ultimate effective date of (c) and (d)?
No interim requirement. Keep doing what you’re doing re: Principal review… firms can adopt new procedures now if they want.
Principal doesn’t need insurance license to approve this business. 26, 24 or 9-10 license is okay.
Rule now states that Principal must approve within 7 business days of the customer signing the application. The workshop presenters said it was 7 days from the date the OSJ received the completed application. Assumption: clarification is forthcoming with Rule change.
Application must be sent by next business day after Principal approval (noon on Day 8 at latest)
Firms can hold customer checks pending Principal review—relief from net capital reserve and n/c rules. “Promptly transmit” is waived if 2821 is met.:
Copy check, record date rec’d and date transmitted to vendor or returned to customer. (i.e., on checks rec’d forwarded blotter)
$ must be sent by noon next day after approval.
Possible Rule change about use of suspension a/c’s at ins. companies. This would allow funds to be send pending Principal approval.
6. WSP:
Although this part of the Rule has been delayed, it (paragraph (d)) will not change. Firm will be required to have written procedures.
Automated systems to review/approve v/a business is NOT permitted.
7. TRAINING:
Training program must be in effect by May 5.
Training required on more than just general characteristics--on specific products offered by firm.
Rely on 3rd parties, such as wholesalers, ins. co’s? Okay, but firm ultimately responsible.
Train all reps on 2821 by May 5.
Can put in c/e firm element, but some training should be provided by May 5.
Use webcasts and e-learning to provide training.
For wholesalers who promote v/a products to firms—training req. does not apply (no recs to customers)
8. MISC:
Q: Offshore V/A’s—included?
A: Rule focuses on whether it’s a registered product, not if it’s offshore (no explicit answer to question)
FINRA “Relies on firms to set their own parameters for suitability”—FINRA doesn’t set.
Q: What is reasonable for procedures/disclosures?
A: Firm decides. For instance, could require customer sign-off on purchase/exchange.
Q: Does FINRA have any plans for an online tool like the Mutual Fund expense analyzer to use with V/A analysis?
A: They are exploring this.
Q: Will FINRA be providing other tools, like disclosure forms? Replacement forms?
A: No, they’re not working on this.
Workshop time estimated: 75 minutes; actual time: 50 minutes.
Friday, January 4, 2008
Deferred Variable Annuities Rule -- some parts delayed
Oh my gosh...for how long has the new rule on Deferred Variable Annuities been forthcoming?? The Rule (2821) was to be effective May 5, but certain parts of it will now be delayed until August 4. FINRA has asked the SEC for more time to consider three issues related to paragraph (c):
- the seven-business-day period within which principal review must be completed;
- principal review of all transactions as if they had all been recommended; and
- the prohibition on depositing customer funds in an insurer's suspense account prior to completion of an affiliated broker-dealer's principal's review.
The rest of the Rule will be effective May 8. Please see Notice 07-53 for details. http://www.finra.org/RulesRegulation/NoticestoMembers/2007NoticestoMembers/P037403
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