As many of you know, in 2009 everyone was panicking thinking they would have to get a securities license and some actually obtained a Series 65 and in July of 2010 the courted vacated the order. The court stated the following in regards to 151A, “Having determined that the SEC’s S. 2(b) analysis is lacking, we grant the petitions [assertion that] the SEC failed properly to consider the effect of the rule upon efficiency, competition, and capital formation… We therefore order that Rule 151A be vacated.” Now states such as Iowa, Tennessee, and Arkansas have deemed that in order to advise on movement of a securities, you must be securities licensed and in some cases have taken regulatory action against the insurance agents.
When looking at a portfolio of a client, it is imperative that you understand your role as the agent and document, document and document. Remember….Document when you are moving securities to Fixed Index Annuities, even if you are securities licensed. Even though it might have been your clients idea to move the funds, many times they will forget so it is important to have a document signed by both parties.
Insurance companies are also looking carefully at the Source of Funds issue. In the past weeks I have had many cases that have been questioned by suitability due to it being a large cash with application. In this case the agent was very upfront that the owner had cashed in annuities without his knowledge. Even though the agent disclosed this upfront, the company needed information on the annuities that were cashed in and wanted to ensure he was not the writing agent on those accounts. This case worked out because they client did not have surrender charges and the agents were different, but it could have resulted in a rejection by the company. Remember, large cash purchases will be scrutinized closely by the suitability departments in order to protect themselves, the client and the agent.
If you do not remember one thing from this information, remember this…..DOCUMENT…..DOCUMENT……DOCUMENT