(a) Best
Interest Obligations. A producer, when recommending an annuity, shall act in
the best interest of the consumer under the circumstances known at the time the
recommendation is made, without placing the producer's or the insurer's
financial interest ahead of the consumer's interest. A producer has acted in
the best interest of the consumer if the producer has satisfied the
requirements established in this subsection regarding care, disclosure,
conflict of interest and documentation.
(1)
Care Obligation.
(A)The producer, in making a
recommendation, shall exercise reasonable diligence, care and skill to:
(i) Know the consumer's financial situation,
insurance needs and financial objectives;
(ii) Understand the available recommendation
options after making a reasonable inquiry into options available to the
producer;
(iii) Have a reasonable
basis to believe the recommended option effectively addresses the consumer's
financial situation, insurance needs and financial objectives over the life of
the product, as evaluated in light of the consumer profile information; and
(iv) Communicate the basis or
bases of the recommendation.
(B) The requirements under subparagraph (A)
of this subdivision include making reasonable efforts to obtain consumer
profile information from the consumer prior to recommending an
annuity.
(C) The requirements under
subparagraph (A) of this subdivision require the producer to consider the types
of products the producer is authorized and licensed to recommend or sell that
address the consumer's financial situation, insurance needs and financial
objectives, and such requirements do not require analysis or consideration of
any products outside the producer's authority and license or other possible
alternative products or strategies available in the market at the time of the
recommendation. The producer shall be held to standards applicable to producers
with similar authority and licensure.
(D) The requirements under this subsection do
not create a fiduciary obligation or relationship and only create a regulatory
obligation as established in sections
38a-432a-1 to
38a-432a-8,
inclusive, of the Regulations of Connecticut State Agencies.
(E) The consumer profile information,
characteristics of the insurer, and product costs, rates, benefits and features
are the factors that are generally relevant in determining whether an annuity
effectively addresses the consumer's financial situation, insurance needs and
financial objectives, but the level of importance of each factor under the care
obligation established in this subdivision may vary depending on the facts and
circumstances of a particular case, provided no such factor may be considered
in isolation.
(F) The requirements
under subparagraph (A) of this subdivision include having a reasonable basis to
believe the consumer would benefit from certain features of the annuity such as
annuitization, death or living benefit or other insurance-related
features.
(G) The requirements
under subparagraph (A) of this subdivision apply to the particular annuity as a
whole and the underlying subaccounts to which funds are allocated at the time
of purchase or exchange of an annuity, and riders and similar producer
enhancements, if any.
(H) The
requirements under subparagraph (A) of this subdivision do not require the
producer to recommend the annuity with the lowest one-time or multiple
occurrence compensation structure.
(I) The requirements under subparagraph (A)
of this subdivision do not impose on the producer ongoing monitoring
obligations under the care obligation established in this subdivision, although
such an obligation may be separately owed under the terms of a fiduciary,
consulting, investment advising or financial planning agreement between the
consumer and the producer.
(J) In
the case of an exchange or replacement of an annuity, the producer shall
consider the whole transaction, which includes taking into consideration
whether:
(i) The consumer will incur a
surrender charge, be subject to the commencement of a new surrender period,
lose existing benefits, such as death, living or other contractual benefits, or
be subject to increased fees, investment advisory fees or charges for riders
and similar product enhancements;
(ii) The replacing product would
substantially benefit the consumer in comparison to the replaced product over
the life of the product; and
(iii)
The consumer has had another annuity exchange or replacement and, in
particular, an exchange or replacement within the preceding sixty (60) months.
(K) Nothing in sections
38a-432a-1 to
38a-432a-8,
inclusive, of the Regulations of Connecticut State Agencies shall be construed
to require a producer to obtain any license other than a producer license with
the appropriate line of authority to sell, solicit or negotiate insurance in
this state, including, but not limited to, any securities license, in order to
fulfill the duties and obligations contained in sections
38a-432a-1 to
38a-432a-8,
inclusive, of the Regulations of Connecticut State Agencies; provided the
producer shall not give advice or provide services that are otherwise subject
to securities laws or engage in any other activity requiring other professional
licenses.
(2)
Disclosure obligation.
(A) Prior to
recommending or selling an annuity, the producer shall prominently disclose to
the consumer on a form substantially similar to Appendix A:
(i) A description of the scope and terms of
the relationship with the consumer and the role of the producer in the
transaction;
(ii) An affirmative
statement disclosing whether the producer is licensed and authorized to sell
the following products:
(I) Fixed
annuities;
(II) Fixed indexed
annuities;
(III) Variable
annuities;
(IV) Life
insurance;
(V) Mutual
funds;
(VI) Stocks and bonds;
and
(VII) Certificates of
deposit;
(iii) An
affirmative statement disclosing whether the producer is authorized, contracted
(or appointed), or otherwise able to sell insurance products, using the
following descriptions:
(I) From one
insurer;
(II) From two (2) or more
insurers; or
(III) From two (2) or
more insurers although primarily contracted with one (1) insurer;
(iv) A description of the sources
and types of cash compensation and non-cash compensation to be received by the
producer, including whether the producer is to be compensated for the sale of a
recommended annuity by commission as part of premium or other remuneration
received from the insurer, intermediary or other producer or by fee as a result
of a contract for advice or consulting services; and
(v) A notice disclosing the consumer's right
to request additional information regarding cash compensation described in
subparagraph (B) of this subdivision;
(B) Upon request by the consumer or the
consumer's designated representative, the producer shall disclose:
(i) A reasonable estimate of the amount of
cash compensation to be received by the producer, which may be stated as a
range of amounts or percentages; and
(ii) Whether the cash compensation is a
one-time or multiple occurrence amount, and if a multiple occurrence amount,
the frequency and amount of the occurrence, which may be stated as a range of
amounts or percentages; and
(C) Prior to or at the time that the producer
recommends or sells an annuity, the producer shall have a reasonable basis to
believe the consumer has been informed of various features of the annuity, such
as the potential surrender period and surrender charge, potential tax penalty
if the consumer sells, exchanges, replaces, surrenders or annuitizes the
annuity, mortality and expense fees, investment advisory fees, any annual fees,
potential charges for and features of riders or other options of the annuity,
limitations on investment returns, potential changes in non-guaranteed elements
of the annuity, insurance and investment components and market risk.
(3) Conflict of interest
obligation. A producer shall identify and avoid or reasonably manage and
disclose material conflicts of interest, including material conflicts of
interest related to an ownership interest.
(4) Documentation obligation. A producer
shall, at the time that the producer recommends or sells an annuity to a
consumer:
(A) Make a written record of any
recommendation and the basis for the recommendation subject to this
regulation;
(B) Obtain a
consumer-signed statement on a form substantially similar to Appendix B
documenting:
(i) The consumer's refusal to
provide the consumer's consumer profile information, if any; and
(ii) The consumer's understanding of the
ramifications of not providing the consumer's consumer profile information or
providing insufficient consumer profile information; and
(C) Obtain a consumer-signed statement on a
form substantially similar to Appendix C acknowledging the annuity transaction
is not recommended if the consumer decides to enter into an annuity transaction
that is not based on the producer's recommendation.
(5) Application of the best interest
obligation. Any requirement applicable to a producer under this subsection
shall apply to every producer who exercises material control or influence in
making a recommendation or sale and receives direct compensation as a result of
the recommendation or sale, regardless of whether the producer has any direct
contact with the consumer. Activities such as providing or delivering marketing
or educational materials, product wholesaling or other back office product
support, and general supervision of a producer do not, in and of themselves,
constitute material control or influence.