Suitability Rule for Variable Annuities from FINRA

Investment News’  Darla Mercado recently gave an update on how the annuity industry is dealing with a new rule. Last year, the Financial Industry Regulatory Authority (FINRA) passed Rule 2821, a suitability rule in order to ensure that variable annuities are sold to the appropriate investors. Provisions in the rule include:

  • suitability checks (i.e. liquidity needs, taxes, client’s assets)
  • formal supervisory systems
  • principal review for all regulated transactions
Some smaller broker-dealers complain that the new policy has resulted in more paperwork and time spent to make sure that buyers understand and sign disclosure forms, some of which are different for each annuity provider. Despite their struggles with full compliance, FINRA seems intent on continuing the policy.
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