SEC Finalizes Approval of Variable Annuity Rule
The SEC has approved the principal review requirements of NASD Rule 2821 governing purchases and exchanges of deferred variable annuities. Under the modified and approved Rule, principal review must occur within 7 business days of receipt of a complete application by the OSJ. The initially proposed rule required review within 7 business days of a customer’s signature. The modified and approved Rule makes 2821 only applicable to recommended transactions and not customer-initiated transaction. The modified provisions become effective on February 8, 2010, although the suitability, supervision, and training provisions are already in effect.
OUR TAKE: These modifications make sense, and FINRA deserves credit for listening to industry comments. Starting the principal review clock from the date of customer signature created a fire drill in situations where an application was deficient, or a customer failed to timely deliver the application after signature. It also never made sense to require all these review requirements where customers purchased variable annuities without a broker involved.