Recommendations of Variable Life Insurance to Customers (Suitability)

PURPOSE: This rule effectuates and aids in the interpretation of section 375.141.1(8), RSMo, with respect to the codification of professional standards of conduct in the recommendation of variable life insurance contracts. Failure to meet these standards constitutes the demonstration of incompetence, untrustworthiness, or financial irresponsibility of producers in the offer, sale, or exchange of variable life contracts. (1) The standards of conduct codified in this rule reflect the professionalism of a licensed insurance producer. Grounds for the discipline or disqualification of producers shall include, in addition to other grounds specified in section 375.141, RSMo, failure to comply with or violation of the following professional standards of conduct: (A) In recommending to an individual customer the purchase, sale, or exchange of any variable life product, a producer shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other investment holdings and as to his financial situation and needs; (B) Prior to the execution of a variable life transaction recommended to an individual customer, a producer shall make reasonable efforts to obtain information concerning— 1. The customer’s financial status, including annual income, financial situation and needs, and existing assets; 2. The customer’s tax status; 3. The customer’s financial objectives, including investment objectives, reasonably anticipated income needs, and risk tolerance; 4. The customer’s investment time horizon, liquid net worth, and current and reasonably anticipated needs for liquidity; and 5. Such other information used or considered to be reasonable by such producer in making recommendations to the customer; (C) Interpretation of subsection (1)(A) of this rule shall be guided by judicial and administrative opinions and decisions construing substantially similar requirements of the Financial Industry Regulatory Authority (FINRA) or its predecessor or successor organizations. (2) Record Keeping. The determinations required by this rule shall be documented by the producer recommending the transaction. (3) No person shall materially aid any other person in any violation or failure to comply with any standard set forth in this rule. AUTHORITY: sections 374.045, 375.013, 375.141, and 375.143, RSMo 2016.* Original rule filed July 5, 2005, effective Jan. 30, 2006. Amended: Filed Nov. 30, 2007, effective July 30, 2008. Amended: Filed Sept. 30, 2016, effective March 30, 2017. *Original authority: 374.045, RSMo 1967, amended 1993, 1995, 2008; 375.013, RSMo 1993, amended 1995; 375.141, RSMo 1961, amended 1965, 1967, 1981, 1984, 1989, 1993, 2001; and 375.143, RSMo 2007.