§ 26.1-34.2-02 — Definitions

North Dakota § 26.1-34.2-02

• Jurisdiction: North Dakota
• Title 26.1: Insurance
• Ch. 26.1-34.2: Annuity Transaction Practices

Text

1. "Annuity" means an annuity that is an insurance product under state law which is
individually solicited, whether the product is classified as an individual or group
annuity.
2. "Cash compensation" means a discount, concession, fee, service fee, commission,
sales charge, loan, override, or cash benefit received by a producer in connection with
the recommendation or sale of an annuity from an insurer or intermediary or directly
from the consumer.
3. "Comparable standards":
a. With respect to a broker-dealer and registered representative of a broker-dealer,
applicable federal securities and exchange commission and financial industry
regulatory authority rules pertaining to best interest obligations and supervision of
annuity recommendations and sales, including Regulation Best Interest
[17 CFR 240];
b. With respect to an investment adviser registered under federal or state securities
laws or an investment adviser representative, the fiduciary duties and all other
requirements imposed on such investment advisers or investment adviser
representatives by contract or under the federal Investment Advisers Act of 1940
[15 U.S.C. 80b-1 et seq.] or applicable state securities law, including, the form
ADV and interpretations; and
c. With respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions,
and all other requirements attendant to such status under the federal Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] or the federal
Internal Revenue Code as amended.

4. "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;
d. Financial experience;
e. Insurance needs;
f. Financial objectives;
g. Intended use of the annuity;
h. Financial time horizon;
i. Existing assets or financial products, including investment, annuity, and insurance
holdings;
j. Liquidity needs;
k. Liquid net worth;
l. Risk tolerance, including willingness to accept nonguaranteed elements in the
annuity;
m. Financial resources used to fund the annuity; and
n. Tax status.
5. "Continuing education credit" means one continuing education credit as provided for
under section 26.1-26-31.1.
6. "Continuing education provider" means an individual or entity approved to offer
continuing education courses pursuant to section 26.1-26-31.1.
7. "Financial professional" means a producer that is regulated and acting as:
a. A broker-dealer registered under federal or state securities laws or a registered
representative of a broker-dealer;
b. An investment adviser registered under federal or state securities laws or an
investment adviser representative associated with the federal or state registered
investment adviser; or
c. A plan fiduciary under section 3(21) of the federal Employee Retirement Income
Security Act of 1974 [29 CFR 2510.3-21] or fiduciary under section 4975(e)(3) of
the Internal Revenue Code [26 U.S.C. 4975(e)(3)] as amended.
8. "Insurer" means a company required to be licensed under the laws of this state to
provide insurance products, including annuities.
9. "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.
10. "Material conflict of interest" means a financial interest of the producer in the sale of an
annuity which a reasonable person would expect to influence the impartiality of a
recommendation. The term does not include cash compensation or noncash
compensation.
11. "Noncash compensation" means any form of compensation that is not cash
compensation, including health insurance, office rent, office support, and retirement
benefits.
12. "Nonguaranteed elements" means the premiums, credited interest rates, including a
bonus, benefits, values, dividends, noninterest based credits, charges, or elements of
formulas used to determine any of these which are subject to company discretion and
are not guaranteed at issue. An element is considered nonguaranteed if any of the
underlying nonguaranteed elements are used in the element's calculation.
13. "Producer" means an individual or entity required to be licensed under the laws of this
state to sell, solicit, or negotiate insurance, including annuities. The term includes an
insurer if no producer is involved.
14. "Recommendation" means advice provided by a producer to an individual consumer
which was intended to result or results in a purchase, a replacement, or an exchange
of an annuity in accordance with that advice. The term 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.
15. "Replacement" means a transaction in which a new annuity 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 other 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 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; or
e. Used in a financed purchase.