Florida Adopts Reg BI-Friendly Annuity Sales Rule Update

During the Trump administration, the SEC developed Regulation Best Interest. Reg BI requires financial services product sellers to document that they understand a customer’s needs, have considered a wide range of potential solutions, and have tried to recommend the best solution. It appears to allow use of sales commissions.

The NAIC Update

The NAIC developed an annuity transactions model intended to protect older consumers in 2003, and it emphasized insurance company sales rep supervision responsibilities in a 2010 update.

The designers of the NAIC’s new suitability model update designed it to complement Reg BI, and to serve as an alternative to a strict fiduciary rule approach. The NAIC adopted the update in 2020.

In addition to Florida, the list of states that have adopted the NAIC model update in recent weeks includes Washington, West Virginia and Wyoming.

The SEC’s Authority

The SEC already has the authority to regulate the sales of variable annuities, which can expose holders to the risk of loss of principal.

Analysts at the NAIC have suggested that Section 989J of the Dodd-Frank Wall Street Reform and Consumer Protection Act may give the SEC authority to regulate the sale of fixed annuities if states fail to adopt the NAIC’s suitability model update by 2025.

Pictured: Gov. Ron DeSantis speaks during a rally in Hialeah, Florida, in August 2022. (Photo: Eva Maria Uzcategui/Bloomberg)