(a)For purposes of this article:
(1)“Annuity” means an annuity that is an insurance product under California law that is individually solicited, whether the product is classified as an individual or group annuity.
(2)“Cash compensation” means any discount, concession, fee, service fee, commission, sales charges, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from a consumer.
(3)“Consumer profile information” means information that is reasonably appropriate to determine whether a recommendation
addresses the consumer’s financial situation, insurance needs, and financial objectives, including, at a minimum, the following:
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(a)
For purposes of this article:
(1)
“Annuity” means an annuity that is an insurance product under California law that is individually solicited, whether the product is classified as an individual or group annuity.
(2)
“Cash compensation” means any discount, concession, fee, service fee, commission, sales charges, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from a consumer.
(3)
“Consumer profile information” means information that is reasonably appropriate to determine whether a recommendation
addresses the consumer’s financial situation, insurance needs, and financial objectives, including, at a minimum, the following:
(A)
Age.
(B)
Annual income.
(C)
Financial situation and needs, including debts and other obligations, and the financial resources used for the funding of the annuity.
(D)
Financial experience.
(E)
Insurance needs.
(F)
Financial objectives.
(G)
Intended use of the annuity, including any riders attached thereto.
(H)
Financial time horizon, including the duration of existing
liabilities and obligations.
(I)
Existing assets or financial products, including investments, annuity, and insurance holdings.
(J)
Liquidity needs.
(K)
Liquid net worth.
(L)
Risk tolerance, including, but not limited to, the willingness to accept nonguaranteed elements in the annuity.
(M)
Tax status.
(N)
Whether or not the consumer has a reverse mortgage.
(O)
Whether or not the consumer intends to apply for means-tested government benefits, including Medi-Cal or the veterans’ aid and attendance benefit.
(P)
Any other relevant information that the producer or the insurer knew or reasonably should have known about, as provided by the consumer.
(4)
“Continuing education credit” or “CE credit” means one continuing education credit hour as defined in Section 2188.2(i) of Title 10 of the California Code of Regulations.
(5)
“Continuing education provider” or “CE provider” means an individual or entity that is certified to offer continuing education courses pursuant to Section 2186.1(b) and Section 2188 of Title 10 of the California Code of Regulations.
(6)
“FINRA” means the Financial Industry Regulatory Authority or a successor agency.
(7)
“Insurer” means a company required to be licensed or to hold a certificate of authority, or both, under
California law to provide insurance products, including annuities.
(8)
“Intermediary” means an entity contracted directly with an insurer or with another entity contracted with an insurer to facilitate the sale of the insurer’s annuities by producers.
(9)
“Material conflict of interest” means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation. “Material conflict of interest” does not include cash compensation or noncash compensation.
(10)
“Noncash compensation” means any form of compensation that is not cash compensation, including, but not limited to, health insurance, office rent, office support, and retirement benefits.
(11)
“Nonguaranteed elements”
means the premiums, benefits, values, credits, charges, and other elements not guaranteed over the life of the annuity, such as credited interest rates, including any temporary bonus interest rate, dividends, noninterest-based credits, index parameters, periodic expense charges, or elements of formulas used to determine any of these nonguaranteed elements, that are subject to insurer discretion and are not guaranteed at issue. An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in its calculation.
(12)
“Producer” means a person required to be licensed under California law to sell, solicit, or negotiate insurance, including annuities. “Producer” includes an insurer when no producer is involved.
(13)
(A)
“Recommendation” means advice or guidance provided or made by a producer or an insurer to an individual consumer
that was intended to result or does result in a purchase, exchange, or replacement of an annuity in accordance with that advice or guidance.
(B)
“Recommendation” does not include general communication to the public, generalized customer services assistance or administrative support, general educational information and tools, prospectuses, or other product and sales material.
(14)
“Replacement” means a transaction in which a new annuity policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer, whether or not a producer is involved, that by reason of the transaction, an existing annuity or insurance policy has been or is to be any of the following:
(A)
Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or
otherwise terminated.
(B)
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.
(C)
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 be paid.
(D)
Reissued with any reduction in cash value.
(E)
Used in a financed purchase.
(15)
“SEC” means the United States Securities and Exchange Commission.