An amendment to Regulation 187 takes New York State’s oversight of annuities sales a step further than the state’s current suitability standard.
The amendments were passed last July; the phase-in date is scheduled for August 1.
The law requires that providers of financial services consider the interests of the consumer above everything else when making the annuity recommendation, and mandate that any advice be “based on an evaluation of the relevant suitability information of the consumer and reflects the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing.”
The new rule will also put new disclosure and training requirements on broker-dealers and insurers selling annuities. Additionally, it will prevent those selling annuities from calling themselves advisors unless they are licensed as such.
The new regulations are coming into effect after the SEC passed their Regulation Best Interest (Reg BI) standard last month. The changes were originally effected to address regulatory gaps on the federal level after the U.S. Department of Labor’s Fiduciary Rule was eliminated in March 2018.
Essentially, New York State is getting closer to calling for a fiduciary standard. The legislature has determined that this is required because certain brokers aren’t doing what’s best for their clients.
Several states, including Nevada and New Jersey, have proposed some form of legislative or regulatory fiduciary rules covering all investment advisors in their state. Massachusetts announced its own rule shortly after the SEC released Reg BI, saying that the federal regulatory shortfalls made action on the part of the state necessary. The New York amendments pertain only to those broker-dealers selling annuity products.
The regulations will take effect for providers selling life insurance policies on Feb. 1, 2020.
For more information, please read:
New York Implements New Standard for Annuities Sales | Wealth Management