The Financial Industry Regulatory Authority (“FINRA”) has submitted a filing to the SEC seeking to delay the May 5, 2008 effective date for paragraphs (c) (principal review) and (d) (supervisory procedures) of new NASD Rule 2821, which establishes suitability, supervisory and training requirements for sales and exchanges of deferred variable annuities. (The Rule’s requirements were summarized in the September 18, 2007 Alert; FINRA Regulatory Notice 07‑53 (November 2007) announcing the Rule’s effective date and providing interpretive guidance was summarized in the November 20, 2007 Alert.) FINRA’s filing proposes that the SEC delay the effective date of paragraphs (c) and (d) of the Rule until 180 days after the SEC either approves or rejects the substantive changes to the Rule FINRA intends to propose in the near future in a separate filing. FINRA plans to propose changing the event that triggers the beginning of the period within which a principal must review and determine whether to approve or reject a customer’s application for a deferred variable annuity. FINRA also intends to propose limiting the Rule’s application to recommended transactions. Finally, FINRA plans to clarify various other issues, including whether (and, if so, under what circumstances) a broker-dealer can forward funds to an affiliated insurance company prior to principal approval. FINRA’s filing seeking to delay the effective date of paragraphs (c) and (d) of the Rule notes that paragraphs (a), (b), and (e) of the Rule will become effective as scheduled on May 5, 2008.
Alert April 29, 2008