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628.345(1)(1)In this section:
628.345(1)(a) (a) “Disciplinary period" means the period of time beginning on the effective date of the termination of the license of an intermediary under par. (b) 1. and ending on the date on which a new license is issued to the intermediary. The “disciplinary period" of a person under par. (b) 2., 3. or 4. is the disciplinary period of the intermediary under par. (b) 1. through which the person attains the status of “disciplined person".
628.345(1)(b) (b) “Disciplined person" means any of the following:
628.345(1)(b)1. 1. An intermediary whose license is revoked under s. 628.10 (2) (b) or surrendered under a stipulation.
628.345(1)(b)2. 2. An affiliate of an intermediary under subd. 1.
628.345(1)(b)3. 3. A person in which an intermediary under subd. 1. has, directly or indirectly, more than a 10 percent ownership interest.
628.345(1)(b)4. 4. An agent or employee of a person described in subd. 1., 2. or 3.
628.345(2) (2)During the disciplinary period of a disciplined person, the disciplined person may not be employed by, act as agent for, or be affiliated with, a person engaged in the business of an insurance intermediary.
628.345(3) (3)No person may do any of the following with respect to activities performed in this state:
628.345(3)(a) (a) Pay consideration to, or expenses of, a disciplined person that directly or indirectly relate to services performed as an intermediary by the disciplined person during the disciplinary period of the disciplined person.
628.345(3)(b) (b) Pay consideration to, or expenses of, a disciplined person that directly or indirectly relate to services performed as an intermediary by the person making the payment, or by an agent, employee or affiliate of that person, during the disciplinary period of the disciplined person.
628.345(3)(c) (c) Pay consideration to, or expenses of, a disciplined person for information directly or indirectly provided by the disciplined person during the disciplinary period of the disciplined person for the purpose of assisting in the sale of insurance.
628.345(3)(d) (d) Seek to obtain information from, or use information directly or indirectly provided by, a disciplined person during the disciplinary period of the disciplined person for the purpose of assisting in the sale of insurance.
628.345(3)(e) (e) During the disciplinary period of a disciplined person, permit the disciplined person to be present during solicitation of the sale of insurance, or knowingly solicit the sale of insurance with the assistance of the disciplined person, regardless of whether the disciplined person acts as an intermediary.
628.345(3)(f) (f) During the disciplinary period of a disciplined person, use or refer to an endorsement or referral by the disciplined person for the purpose of soliciting the sale of insurance.
628.345(4) (4)
628.345(4)(a)(a) Except as provided in par. (b), this section applies to all of the following:
628.345(4)(a)1. 1. A disciplined person for whom the disciplinary period is in effect on or after January 1, 1997.
628.345(4)(a)2. 2. That portion of a disciplinary period in effect on or after January 1, 1997, that occurs on and after January 1, 1997.
628.345(4)(b) (b) This section does not apply to an obligation incurred before January 1, 1997, for the payment of consideration to, or expenses of, a disciplined person related to services performed or information provided during the disciplinary period of the disciplined person but before January 1, 1997.
628.345 History History: 1995 a. 396.
628.347 628.347 Suitability in annuity transactions.
628.347(1)(1)Definitions. In this section:
628.347(1)(a) (a) “Annuity" means an annuity that is an insurance product that is individually solicited, whether the product is classified as an individual or group annuity.
628.347(1)(am) (am) “FINRA" means the Financial Industry Regulatory Authority or a succeeding agency.
628.347(1)(b) (b) “Recommendation" means advice provided by an insurance intermediary, or an insurer if no intermediary is involved, to an individual consumer that results in the purchase, exchange, or replacement of an annuity in accordance with that advice.
628.347(1)(d) (d) “Replacement" means a transaction in which a new annuity is to be purchased and it is known, or should be known to the proposing insurance intermediary, or to the proposing insurer if no intermediary is involved, that by reason of the transaction an existing policy or contract has been or is to be any of the following:
628.347(1)(d)1. 1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated.
628.347(1)(d)2. 2. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values.
628.347(1)(d)3. 3. Amended so as to effect either a reduction in benefits or a reduction in the term for which coverage would otherwise remain in force or for which benefits would otherwise be paid.
628.347(1)(d)4. 4. Reissued with a reduction in cash value.
628.347(1)(d)5. 5. Used in a financed purchase.
628.347(1)(e) (e) “Suitability information" means information that is reasonably appropriate to determine the suitability of a recommendation, including all of the following:
628.347(1)(e)2. 2. Annual income.
628.347(1)(e)3. 3. Financial situation and needs, including the financial resources used for the funding of the annuity.
628.347(1)(e)4. 4. Financial experience.
628.347(1)(e)5. 5. Financial objectives.
628.347(1)(e)6. 6. Intended use of the annuity.
628.347(1)(e)7. 7. Financial time horizon.
628.347(1)(e)8. 8. Existing assets, including investment and life insurance holdings.
628.347(1)(e)9. 9. Liquidity needs.
628.347(1)(e)10. 10. Liquid net worth.
628.347(1)(e)11. 11. Risk tolerance.
628.347(1)(e)12. 12. Tax status.
628.347(2) (2)Duties of insurers and insurance intermediaries with regard to recommendations and issuance of annuities.
628.347(2)(a)(a) In recommending to a consumer the purchase of an annuity, or the exchange of an annuity that results in an insurance transaction or series of insurance transactions, an insurance intermediary, or insurer if no intermediary is involved, shall have reasonable grounds to believe that the recommendation is suitable for the consumer on the basis of facts disclosed by the consumer as to his or her investments, other insurance products, and financial situation and needs, including the consumer's suitability information, and that all of the following are true:
628.347(2)(a)1. 1. The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk.
628.347(2)(a)2. 2. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or death or living benefit.
628.347(2)(a)3. 3. The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable, and in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on his or her suitability information.
628.347(2)(a)4. 4. In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable, including taking into consideration all of the following:
628.347(2)(a)4.a. a. Whether the consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits, such as death, living, or other contractual benefits, or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements.
628.347(2)(a)4.b. b. Whether the consumer would benefit from product enhancements and improvements.
628.347(2)(a)4.c. c. Whether the consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.
628.347(2)(b) (b) Before making a recommendation described in par. (a), an insurance intermediary, or insurer if no intermediary is involved, shall make reasonable efforts to obtain the consumer's suitability information.
628.347(2)(bm) (bm) Except as permitted under par. (c), an insurer may not issue an annuity that is recommended by the insurer or its insurance intermediary to a consumer unless it is reasonable to believe that the annuity is suitable based on the consumer's suitability information.
628.347(2)(c)1.1. Subject to subd. 2., neither an insurance intermediary nor an insurer has any obligation to a consumer under par. (a) or (bm) related to any annuity transaction if any of the following applies:
628.347(2)(c)1.a. a. Neither the insurance intermediary nor the insurer made a recommendation.
628.347(2)(c)1.b. b. The insurance intermediary or insurer made a recommendation but the recommendation was later found to have been prepared based on inaccurate material information provided by the consumer.
628.347(2)(c)1.c. c. The consumer refuses to provide relevant suitability information and the annuity transaction is not recommended.
628.347(2)(c)1.d. d. The consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance intermediary.
628.347(2)(c)2. 2. An insurer's issuance of an annuity under circumstances specified in subd. 1. a. to d. shall be reasonable under all circumstances actually known to the insurer at the time the annuity is issued.
628.347(2)(dm) (dm) An insurance intermediary, or insurer if no intermediary is involved, shall at the time of sale do all of the following:
628.347(2)(dm)1. 1. Make a record of any recommendation subject to par. (a).
628.347(2)(dm)2. 2. Obtain a customer-signed statement documenting a customer's refusal, if any, to provide suitability information.
628.347(2)(dm)3. 3. If a customer decides to enter into an annuity transaction that is not based on the insurance intermediary's or insurer's recommendation, obtain a customer-signed statement acknowledging that the annuity transaction is not recommended by the intermediary or insurer.
628.347(3) (3)Insurer's supervisory responsibility.
628.347(3)(a)(a) An insurer shall establish a supervision system that is reasonably designed to achieve the insurer's and its insurance intermediaries' compliance with this section. Under the system, the insurer shall do at least all of the following:
628.347(3)(a)1. 1. Maintain reasonable procedures to inform its insurance intermediaries of the requirements of this section and incorporate the requirements of this section into relevant insurance intermediary training manuals.
628.347(3)(a)2. 2. Establish standards for insurance intermediary product training and maintain reasonable procedures to require its insurance intermediaries to comply with the requirements of sub. (4m).
628.347(3)(a)3. 3. Provide product-specific training and training materials that explain all material features of its annuity products to its insurance intermediaries.
628.347(3)(a)4. 4. Maintain procedures for review of each recommendation before issuance of an annuity that are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. An insurer's procedures may apply a screening system for the purpose of identifying selected transactions for additional review. An insurer's procedures may be accomplished electronically or through other means, including physical review. An electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria.
628.347(3)(a)5. 5. Maintain reasonable procedures to detect recommendations that are not suitable, which may include confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters, and programs of internal monitoring. Nothing in this subdivision prevents an insurer from complying with this subdivision by applying sampling procedures or by confirming suitability information after issuance or delivery of the annuity, or both.
628.347(3)(a)6. 6. Annually provide a report to senior management, including to the senior manager responsible for audit functions, that details a review, with appropriate testing, that is reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.
628.347(3)(b)1.1. Nothing in this subsection restricts an insurer from contracting for the performance of a function required under par. (a), including maintenance of procedures. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties under subs. (5) and (6), regardless of whether the insurer contracts for the performance of a function and regardless of the insurer's compliance with subd. 2.
628.347(3)(b)2. 2. An insurer's supervision system under par. (a) shall include supervision of any contractual performance under this subsection, including all of the following:
628.347(3)(b)2.a. a. Monitoring and, as appropriate, conducting audits to ensure that the contracted function is properly performed.
628.347(3)(b)2.b. b. Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.
628.347(3)(c) (c) An insurer is not required to include in its system of supervision an insurance intermediary's recommendations to consumers of products other than the annuities offered by the insurer.
628.347(3m) (3m)Prohibited acts of intermediary. An insurance intermediary may not dissuade, or attempt to dissuade, a consumer from doing any of the following:
628.347(3m)(a) (a) Truthfully responding to an insurer's request for confirmation of suitability information.
628.347(3m)(b) (b) Filing a complaint.
628.347(3m)(c) (c) Cooperating with the investigation of a complaint.
628.347(4) (4)Financial Industry Regulatory Authority rules.
628.347(4)(a)(a) Subject to pars. (b) and (c), sales made in compliance with FINRA requirements pertaining to suitability and supervision of annuity transactions satisfy the requirements under this section. Nothing in this subsection, however, limits the commissioner's ability to enforce this section, including conducting any investigation necessary for that enforcement.
628.347(4)(b) (b) For par. (a) to apply, an insurer must do all of the following:
628.347(4)(b)1. 1. Monitor the FINRA member broker-dealer using information collected in the normal course of an insurer's business.
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