Mich. Admin. Code R. 500.861 - Standards of conduct and conflicts of interest

Rule 21. The following apply to standards of conduct and conflict of interest:

(a) Every insurer seeking approval to enter into the variable life insurance business in this state, shall adopt by formal action of its board of directors, and file with the commissioner, a written statement specifying the standards of conduct of the insurer, its officers, directors, employees, and affiliates with respect to investments of variable life insurance separate accounts and variable life insurance operations. Such standards of conduct shall be binding on the insurer and those to whom it refers and shall contain at a minimum the items contained in subdivision (c) of this rule.

(b) Rules under any provisions of the insurance laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body. No officer or director of such company nor any member of any managing committee or body of separate account shall receive, directly or indirectly, any commission or any other compensation with respect to the purchase or sale of assets of such separate account. The board of directors of the insurer is responsible for all acts concerning the separate account, except to the extent that authority must be exercised by a separate account committee established pursuant to section 925(3) of the insurance code of 1956, as amended, being S500.925(3) of the Michigan Compiled Laws.

(c) Unless otherwise approved in writing by the commissioner in advance of the transaction, with respect to variable life insurance separate accounts, an insurer or affiliate thereof shall not:

(i) Sell to, or purchase from, any such separate account established by the insurer any securities or other property, other than variable life insurance policies.

(ii) Purchase, or allow to be purchased, for any such separate account, any securities of which the insurer or an affiliate is the issuer.

(iii) Accept any compensation, other than a regular salary or wages from such insurer or affiliate, for the sale or purchase of securities to or from any such separate account other than as provided in subdivision (d)(iii) of R 500.861.

(iv) Engage in any joint transaction, participation, or common undertaking whereby such insurer or an affiliate participates with such a separate account in any transaction in which an insurer or any of its affiliates obtains an advantage in the price or quality of the item purchased, in the service received, or in the cost of such service and the insurer or any of its other affiliates is disadvantaged in any of these respects by the same transaction.

(v) Borrow money or securities from any such separate account other than under a policy loan provision.

(d) No provision of this rule shall be construed to prohibit any of the following:

(i) The investment of separate account assets in securities issued by 1 or more investment companies registered pursuant to the investment company act of 1940 which is sponsored or managed by the insurer or an affiliate, and the payment of investment management or advisory fees on such assets.

(ii) The combination of orders for the purchase or sale of securities for the insurer, an affiliate thereof, any separate accounts, or any 1 or more of them, which is for their mutual benefit or convenience so long as any securities so purchased or the proceeds of any sale thereof are allocated among the participants on some predetermined basis expressed in writing which is designed to assure the equitable treatment of all participants.

(iii) An insurer or an affiliate to act as a broker or dealer in connection with the sale of securities to or by such separate account; however, any commission fee or remuneration charged therefor shall not exceed minimum broker's commission established for any such transaction by any national securities exchange through which such transaction could be effected or such charges prevailing for arm's length transactions in the ordinary course of business in the community where such transaction is effected.

(iv) The rendering of investment management or investment advisory services by an insurer or affiliate, for a fee, subject to the provisions of this rule and R 500.862.

(e) The commissioner may, upon the written request of an insurer or an affiliate, approve a particular transaction or series of proposed transactions which would otherwise be prohibited under subdivision (c) if he determines such transaction is not unfair or inequitable to persons affected under the circumstances of such transactions.

Notes

Mich. Admin. Code R. 500.861

1979 AC