WASHINGTON, D.C. – A state securities regulator organization has proposed a revised model rule that could have significant consequences for retirement planning by limiting access to certain retirement products that deliver protected lifetime income.
In comments due today, the Insured Retirement Institute (IRI) says proposed revisions to a North American Securities Administrators Association’s (NASAA) model regulation are unnecessary, confusing, and conflict with existing strong federal and state consumer protection regulations. IRI is urging the group to withdraw the potentially punitive proposal.
“NASAA’s proposed revisions jeopardize individuals’ access to annuity products,” said Sarah Wood, Director of State Policy and Regulatory Affairs at IRI. “By imposing cumbersome and unnecessary regulations, these revisions create barriers that hinder retirement planning.”
The proposed changes include unworkable provisions that extend beyond current federal and state rules. Under the NASAA proposal, for example, educational and marketing materials could be considered “recommendations” and trigger compliance and enforcement mechanisms.
Rather than risk enforcement action, broker-dealers may eliminate products and services. This will lead to consumers having fewer choices of brokerage products or services and potentially leave them without access to professional financial support.
“NASAA has not identified any issues with the existing federal and state regulatory framework that would require a new bureaucratic layer offering no clear consumer protection benefit,” Wood said.
The U.S. Securities and Exchange Commission’s Regulation Best Interest and the National Association of Insurance Commissioners (NAIC) model best interest regulation provides an enhanced and aligned federal-state consumer protection framework. Both standards require financial professionals to act in the best interest of their clients. The NAIC model has been adopted by 40 states, with more expected to act in the coming months.
IRI said the NASAA proposal presents a complex regulatory issue since a state insurance commissioner who asserts jurisdiction over variable annuities will rely on the NAIC model regulation. In contrast, state securities regulators will depend on different rules for the same security.
Variable annuities are an important product that can help provide workers and retirees with a guaranteed income stream during retirement.
“Annuities can provide many benefits to consumers, both by having more built-in protections and the flexibility to add other benefits to meet particular needs,” Wood said. “Consumers should have ready access to these products, sold under the appropriate standard of conduct to achieve their financial goals, including a secure and dignified retirement.”
IRI noted that rather than complement existing regulatory consumer protections, the NASAA proposal promotes contradictory and confusing rules while fostering less state-by-state uniformity. The proposal includes a menu of provisions that states could pick and choose, leading to a patchwork of varying regulations.
“The availability of eight different subparts within Revision Set #2 [of the proposal] could result in numerous variations depending on which subparts a state chooses to adopt,” Wood said. “It’s concerning that the proposal claims this will promote uniformity when it does the opposite.”
Wood concluded, “NASAA’s proposed revisions threaten to undermine access to annuity products, placing workers’ and retirees’ retirement plans at risk and compromising the financial well-being of countless Americans. IRI urges NASAA members to reject these changes and preserve retirees’ access to the tools they need for a secure financial future.”
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Contact: Dan Zielinski
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