NAFA Pans FINRA Draft 

A regulation proposed by the Financial Industry Regulatory Authority could expand suitability mandates so broadly that they would cover all investment product recommendations.

The National Association of Fixed Annuities, Milwaukee, has voiced that concern in a member alert.

NAFA fears the proposed regulation could apply to any service or strategy used in connection with a firm’s business, regardless of whether the service or strategy involves securities.

FINRA says the proposal, Regulatory Notice 09-25, Proposed Consolidated FINRA Rules Governing Suitability and Know-Your-Customer Obligations, is part of efforts to develop a new consolidated FINRA rulebook.

The proposal comment period ends June 29.

NAFA sees the proposal as “a clear attempt to take control – read collect fees - on all product recommendations,” including recommendations involving life insurance, long term care insurance, health insurance, property-casualty insurance, savings accounts and fixed annuities, NAFA officials say.

“And, it isn’t just product recommendations,” NAFA officials say, noting the proposed regulation also would apply to service and strategies.

“So a suggestion of, say, where to bank, conceivably might require suitability review,” NAFA officials warn.

NAFA officials say they are concerned that the proposed regulation “is just the first step in an obvious strategy to control all activities at the broker dealer level.”

“FINRA appears to be oblivious to the real problems of asking a broker-dealer to ensure suitability of a long term care product,” NAFA officials write. “Will they ensure general product knowledge through additional training requirements? Will they ensure specific product knowledge through annual certification testing? or will they require licensing (life, LTC, health etc.)?”

Coordination of FINRA rules with the requirements of state insurance and securities regulators also could be a problem, NAFA officials write.

“Dual regulation, especially when the second is one gained by stealth without legitimate authorization, is a recipe for confusion and expense that will ultimately lead to harmful consequences for the consumer,” NAFA officials contend. 

• • 6/5/2009 9:53:04 AM
  • Jeffrey Reeves
  • Quit!
  • Maybe the answer is to relinquish S6, S7, etc. registrations and quit selling securities. Few Americans are truly qualified investors and most annuity buyers are not. Whole life, health, and annuity products are usually more than adequate to secure the wealth of the typical American and her/his family and they do the job without risk and without creating worry. Perhaps, therefore, the answer to the ongoing challenge of FINRA and the power-grabbers in DC is to withdraw from their area of control. the fewer professional insurance and financial advisors (yes, you can be a true financial advisor without any securities registrations) they control, the less power they wield.
• • 6/5/2009 10:00:03 AM
  • Jerry Vinzetta
  • FINRA Suitability
  • More regulations does not mean better. This is just another example of regulators acting like leslators and taking control of the free enterprise system. I will be contacting my state reps over this and explain to them that they must stop FINRA from distrowing our industry that will also cost consumers from having better products.
• • 6/5/2009 11:10:59 AM
  • ishmel greene
  • finra proposed rule 9-25
  • we continue to add rules on top of rules, but no one exercises existing rules. punish the wrong doers, leave the good guys alone . stop condeming the industry group and go after the criminals. just do what you should be doing. If you were the police you would arrest everybody that drives, not just the law breakers.
• • 6/5/2009 11:18:46 AM
  • Robert Hanten
  • FINRA & Suitability
  • I might just quit this whole financial services business and let Obama take care of me. If I lose the rest of the equity from my home and investments, why not?
• • 6/5/2009 11:24:30 AM
  • wkb4447
  • Regulation creep
  • Whether this is a valid fear or not, I don't know. But, it is just one element related to the growing frustration and discouragement of any honest and ethical business person who may be on the fence about staying in the financial services industry. I work with hundreds of financial consultants, advisors, and insurance professionals and the message I hear time and time again (especially toward the end of the week) is "I don't know why I stay in this business. It's hard enough to work with vendors, clients, policyowners, and broker/dealers. This (whatever the issue might be) is just one more thing to deal with." We need oversight in this industry. It's essential. But, let's watch for the big problems that can bring the whole house down, such as what the idiots at AIG came up with. What regulatory agency was asleep at that switch?
• • 6/5/2009 11:38:33 AM
  • Dan Winagle
  • FINRA REGULATORY OVERSIGHT DRAFT
  • This consideration should be opposed without question. We already have too much regulatory oversight in the insurance and financial field. Regulate all securities investments as stringently as possible (them maybe would not have as many Madoff's running around as we have). However, non-equity investments such as CD's, fixed annuities ete. already have sufficient regulation.

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