Prompted by 80 disciplinary actions over unsuitable annuity sales in the past two years,
To help determine that a rep is selling a suitable product to an investor, the rep will have to determine that the investor fully understands the annuity and its underlying sub-accounts. The rep will also have to document the investors risk and liquidity requirements and provide them with a risk disclosure document written in plain English. Registered firms will now also have to establish and maintain written supervisory procedures and properly train their sales reps on annuities.
"Because of our concerns about unsuitable recommendations and inadequate supervision, variable annuity sales have been the focus of increased, NASD-wide attention for the last two years," said NASD Chairman and CEO Robert Glauber. "We believe this rule proposal represents an appropriate approach to ensuring adequate protection for investors considering or purchasing deferred variable annuities."
