FINRA to Update Variable Annuity Exam Questions
State insurance commissioners, the regulators who oversee non-variable annuities, operate under separate rules but may choose to apply FINRA standards, or locally developed standards reflecting FINRA rules, in their jurisdictions.
The New Exam Questions
FINRA has revised many of its variable annuity and variable annuity buyout questions.
It also has added this buyout question: “What is your firm’s process to supervise registered representatives who advise their clients’ decisions whether or not to accept a buyout offer?”
FINRA says its examiners could issue the following exam finding:
Poor and Insufficient Data Quality – Not collecting and retaining key information on variable annuity transactions, particularly in connection with exchange transactions; relying on processes for data collection and retention in situations where the volume of variable annuity transactions renders these processes ineffective; and failing to address inconsistencies in available data for variable annuities, as well as data formats and reporting processes.
The listing list of “effective practices” for firms with variable annuity operations now includes a compliance tech item:
Automated Data Supervision — Creating automated solutions to synthesize variable annuity data (including general product information, share class, riders and exchange-based activity) in situations warranted by the volume of variable annuity transactions.”
The list of effective practices also includes new data acquisition and data analysis items.
A firm may want to establish a supervisory system that collects key transaction data, such as the transaction date, the sales representative’s name and the customer’s name, FINRA says.
FINRA suggests that a firm should consider factors such as policy riders, policy fees and surrender charges when reviewing annuity exchange transactions.
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