02-031 C.M.R. ch. 917, § 5 - Definitions

1. "Annuity" means an annuity that is an insurance product under the laws of this State that is individually solicited, whether the product is classified as an individual or group annuity.

2. "Cash compensation" means any discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from the consumer.

3. "Consumer profile information" means information that is reasonably appropriate to determine whether a recommendation addresses the consumer's financial situation, insurance needs and financial objectives, including, at a minimum, the following:

A. Age;

B. Annual income;

C. Financial situation and needs, including debts and other obligations;

D. Financial experience;

E. Insurance needs;

F. Financial objectives;

G. Intended use of the annuity;

H. Financial time horizon;

I. Existing assets or financial products, including investment, annuity, and insurance holdings;

J. Liquidity needs;

K. Liquid net worth;

L. Risk tolerance, including but not limited to, willingness to accept non-guaranteed elements in the annuity;

M. Financial resources used to fund the annuity; and

N. Tax status.

4. "Continuing education credit hour" or "CE credit hour" means one credit hour meeting the requirements of Bureau of Insurance Rule Chapter 542: "Educational Requirements for Insurance Professionals."

5. "Continuing education vendor" or "CE vendor" means an individual or entity that is approved to offer continuing education courses pursuant to Bureau of Insurance Rule Chapter 542: "Educational Requirements for Insurance Professionals."

6. "FINRA" means the Financial Industry Regulatory Authority or a succeeding agency.

7. "Insurer" means a company required to be licensed under the laws of this State to provide insurance products, including annuities.

8. "Intermediary" means an entity contracted directly with an insurer or with another entity contracted with an insurer to facilitate the sale of the insurer's annuities by producers.

9.

A. "Material conflict of interest" means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation.

B. "Material conflict of interest" does not include cash compensation or non-cash compensation.

10. "Non-cash compensation" means any form of compensation that is not cash compensation, including, but not limited to, health insurance, office rent, office support and retirement benefits.

11. "Non-guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, dividends, non-interest-based credits, charges, or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

12. "Producer" means a person or entity required to be licensed under the laws of this State to sell, solicit or negotiate insurance, including annuities. For purposes of this rule, "producer" includes an insurer where no producer is involved.

13.

A. "Recommendation" means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, an exchange, or a replacement of an annuity in accordance with that advice.

B. "Recommendation" does not include general communication to the public, generalized customer services assistance or administrative support, general educational information and tools, prospectuses, or other product and sales material.

14. "Replacement" means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer that by reason of the transaction, an existing policy or contract has been or is to be:

A. Lapsed, forfeited, surrendered, or partially surrendered, assigned to the replacing insurer, or otherwise terminated;

B. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of non-forfeiture benefits or other policy values;

C. Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

D. Reissued with any reduction in cash value; or

E. Used in a financed purchase.

15. "SEC" means the United States Securities and Exchange Commission.

Notes

02-031 C.M.R. ch. 917, § 5