23 CAR Part 121 — Suitability in Annuity Transactions

Chapter I

Subchapter B

Subpart 1

23 CAR § 121-101 Purpose {#sec-23-car-121-101 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-101}

23 CAR § 121-101. Purpose.

(a) The purpose of this part is to require:

(1) Producers, as defined in this part, to act in the best interest of the consumer when making a recommendation of an annuity; and

(2) Insurers to establish and maintain a system to supervise recommendations so that the insurance needs and financial objectives of consumers at the time of the transaction are effectively addressed.

(b) Nothing herein shall be construed to create or imply a private cause of action for a violation of this part or to subject a producer to civil liability under the best interest standard of care outlined in 23 CAR § 121-105 or under standards governing the conduct of a fiduciary or a fiduciary relationship.

23 CAR § 121-102 Scope {#sec-23-car-121-102 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-102}

23 CAR § 121-102. Scope.

This part shall apply to any sale or recommendation of an annuity.

23 CAR § 121-103 Exemptions {#sec-23-car-121-103 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-103}

23 CAR § 121-103. Exemptions.

Unless otherwise specifically included, this part shall not apply to transactions involving:

(1) Direct response solicitations where there is no recommendation based on information collected from the consumer pursuant to this part;

(2) Contracts used to fund:

(A) An employee pension or welfare benefit plan that is covered by the Employee Retirement Income Security Act of 1974 (ERISA);

(B) A plan described by sections 401(a), 401(k), 403(b), 408(k), or 408(p) of the Internal Revenue Code, as amended, if established or maintained by an employer;

(C) A government or church plan defined in Section 414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax-exempt organization under Section 457 of the Internal Revenue Code; or

(D) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(3) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or

(4) Any annuity contract or certificate that is issued to fund a prepaid funeral benefits contract as defined in Arkansas Code § 23-40-103(15) or any similar annuity contract written through or in connection with a funeral home with the purpose of providing funds for final expenses and having similar underwriting characteristics as prepaid funeral benefits contracts, or any annuity contract or certificate that is issued to fund a prearrangement as defined in Arkansas Code § 23-40-103(14).

History

• Codification Notes: The Employee Retirement Income Security Act of 1974 (ERISA) is codified generally at 29 U.S.C. § 1001 et seq. Authorities: Arkansas Code § 23-61-108; Arkansas Code § 23-66-207; Arkansas Code § 23-66-307

23 CAR § 121-104 Definitions {#sec-23-car-121-104 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-104}

23 CAR § 121-104. Definitions.

As used in this part:

(1) "Annuity" means an annuity that is an insurance product under state 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 charge, 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 the consumer;

(3) "Commissioner" means the Insurance Commissioner;

(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, but not limited to, willingness to accept nonguaranteed elements in the annuity;

(M) Financial resources used to fund the annuity; and

(N) Tax status;

(5) "Continuing education credit" or "CE credit" means one (1) continuing education credit as defined in Arkansas Code § 23-64-301 et seq., and Continuing Education for Producers and Adjusters, 23 CAR pt. 18;

(6) "Continuing education provider" or "CE provider" means an individual or entity that is approved to offer continuing education courses pursuant to Continuing Education for Producers and Adjusters;

(7) "Department" means the State Insurance Department;

(8) "FINRA" means the Financial Industry Regulatory Authority or a succeeding agency;

(9) "Insurer" means a company required to be licensed under the laws of this state to provide insurance products, including annuities;

(10) "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;

(11)(A) "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.

(B) "Material conflict of interest" does not include cash compensation or noncash compensation;

(12) "Noncash compensation" means any form of compensation that is not cash compensation, including, but not limited to:

(A) Health insurance;

(B) Office rent;

(C) Office support; and

(D) Retirement benefits;

(13)(A) "Nonguaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, dividends, non-interest-based credits, charges, or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue.

(B) An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in its calculation;

(14)(A) "Producer" means a person or entity required to be licensed under the laws of this state to sell, solicit, or negotiate insurance, including annuities.

(B) For purposes of this part, "producer" includes an insurer where no producer is involved;

(15)(A) "Recommendation" means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, an exchange, or a replacement of an annuity in accordance with that advice.

(B) “Recommendation” does not include:

(i) General communication to the public;

(ii) Generalized customer services assistance or administrative support;

(iii) General educational information and tools;

(iv) Prospectuses; or

(v) Other product and sales material;

(16) "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; and

(17) "SEC" means the United States Securities and Exchange Commission.

23 CAR § 121-105 Duties of insurers and producers {#sec-23-car-121-105 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-105}

23 CAR § 121-105. Duties of insurers and producers.

(a) Best interest obligations.

(1)(A) A producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer's or the insurer's financial interest ahead of the consumer's interest.

(B) A producer has acted in the best interest of the consumer if they have satisfied the following obligations regarding care, disclosure, conflict of interest, and documentation.

(2) Care obligation.

(A) The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to:

(i) Know the consumer's:

(a) Financial situation;

(b) Insurance needs; and

(c) Financial objectives;

(ii) Understand the available recommendation options after making a reasonable inquiry into options available to the producer;

(iii) Have a reasonable basis to believe the recommended option effectively addresses the consumer's financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information; and

(iv) Communicate the basis or bases of the recommendation.

(B) The requirements under subdivision (a)(2)(A) of this section include making reasonable efforts to obtain consumer profile information from the consumer prior to the recommendation of an annuity.

(C)(i) The requirements under subdivision (a)(2)(A) of this section require a producer to consider the types of products the producer is authorized and licensed to recommend or sell that address the consumer's:

(a) Financial situation;

(b) Insurance needs; and

(c) Financial objectives.

(ii) This does not require analysis or consideration of any products outside the authority and license of the producer or other possible alternative products or strategies available in the market at the time of the recommendation.

(iii) Producers shall be held to standards applicable to producers with similar authority and licensure.

(D) The requirements under this subsection do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this part.

(E)(i) The consumer profile information, characteristics of the insurer, and product costs, rates, benefits, and features are those factors generally relevant in making a determination whether an annuity effectively addresses the consumer's financial situation, insurance needs, and financial objectives, but the level of importance of each factor under the care obligation of this subsection may vary depending on the facts and circumstances of a particular case.

(ii) However, each factor may not be considered in isolation.

(F) The requirements under subdivision (a)(2)(A) of this section include having a reasonable basis to believe the consumer would benefit from certain features of the annuity, such as:

(i) Annuitization;

(ii) Death or living benefit; or

(iii) Other insurance-related features.

(G) The requirements under subdivision (a)(2)(A) of this section apply to the particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of an annuity, and riders and similar product enhancements, if any.

(H) The requirements under subdivision (a)(2)(A) of this section do not mean the annuity with the lowest one-time or multiple occurrence compensation structure shall necessarily be recommended.

(I) The requirements under subdivision (a)(2)(A) of this section do not mean the producer has ongoing monitoring obligations under the care obligation under subdivision (a)(2) of this section, although such an obligation may be separately owed under the terms of a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the producer.

(J) In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether:

(i) The consumer will:

(a) Incur a surrender charge;

(b) Be subject to the commencement of a new surrender period;

(c) Lose existing benefits, such as death, living, or other contractual benefits; or

(d) Be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;

(ii) The replacing product would substantially benefit the consumer in comparison to the replaced product over the life of the product; and

(iii) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding sixty (60) months.

(K) Nothing in this part should be construed to require a producer to obtain any license other than a producer license with the appropriate line of authority to sell, solicit, or negotiate insurance in this state, including but not limited to any securities license, in order to fulfill the duties and obligations contained in this part, provided the producer does not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses.

(3) Disclosure obligation.

(A) Prior to the recommendation or sale of an annuity, the producer shall prominently disclose to the consumer on a form substantially similar to Appendix A:

(i) A description of the scope and terms of the relationship with the consumer and the role of the producer in the transaction;

(ii) An affirmative statement on whether the producer is licensed and authorized to sell the following products:

(a) Fixed annuities;

(b) Fixed indexed annuities;

(c) Variable annuities;

(d) Life insurance;

(e) Mutual funds;

(f) Stocks and bonds; and

(g) Certificates of deposit;

(iii) An affirmative statement describing the insurers the producer is authorized, contracted (or appointed), or otherwise able to sell insurance products for, using the following descriptions:

(a) One (1) insurer;

(b) From two (2) or more insurers; or

(c) From two (2) or more insurers although primarily contracted with one (1) insurer;

(iv) A description of the sources and types of cash compensation and noncash compensation to be received by the producer, including whether the producer is to be compensated for the sale of a recommended annuity by commission as part of premium or other remuneration received from the insurer, intermediary, or other producer or by fee as a result of a contract for advice or consulting services; and

(v) A notice of the consumer's right to request additional information regarding cash compensation described in subdivision (a)(3)(B) of this section.

(B) Upon request of the consumer or the consumer's designated representative, the producer shall disclose:

(i) A reasonable estimate of the amount of cash compensation to be received by the producer, which may be stated as a range of amounts or percentages; and

(ii) Whether the cash compensation is a one-time or multiple occurrence amount, and if a multiple occurrence amount, the frequency and amount of the occurrence, which may be stated as a range of amounts or percentages.

(C) Prior to or at the time of the recommendation or sale of an annuity, the producer shall have a reasonable basis to believe the consumer has been informed of various features of the annuity, such as:

(i) The potential surrender period and surrender charge;

(ii) Potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity;

(iii) Mortality and expense fees;

(iv) Investment advisory fees;

(v) Any annual fees;

(vi) Potential charges for and features of riders or other options of the annuity;

(vii) Limitations on interest returns;

(viii) Potential changes in nonguaranteed elements of the annuity;

(ix) Insurance and investment components; and

(x) Market risk.

(4) Conflict of interest obligation. A producer shall identify and avoid or reasonably manage and disclose material conflicts of interest, including material conflicts of interest related to an ownership interest.

(5) Documentation obligation. A producer shall at the time of recommendation or sale:

(A) Make a written record of any recommendation and the basis for the recommendation subject to this part;

(B) Obtain a consumer signed statement on a form substantially similar to Appendix B documenting a customer’s:

(i) Refusal to provide the consumer profile information, if any; and

(ii) Understanding of the ramifications of not providing his or her consumer profile information or providing insufficient consumer profile information; and

(C) Obtain a consumer signed statement on a form substantially similar to Appendix C acknowledging the annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the producer's recommendation.

(6) Application of the best interest obligation.

(A) Any requirement applicable to a producer under this subsection shall apply to every producer who has exercised material control or influence in the making of a recommendation and has received direct compensation as a result of the recommendation or sale, regardless of whether the producer has had any direct contact with the consumer.

(B) Activities such as providing or delivering marketing or educational materials, product wholesaling or other back office product support, and general supervision of a producer do not, in and of themselves, constitute material control or influence.

(b) Transactions not based on a recommendation.

(1) Except as provided under subdivision (b)(2) of this section a producer shall have no obligation to a consumer under subdivision (a)(2) of this section related to any annuity transaction if:

(A) No recommendation is made;

(B) A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;

(C) A consumer refuses to provide relevant consumer profile information and the annuity transaction is not recommended; or

(D) A consumer decides to enter into an annuity transaction that is not based on a recommendation of the producer.

(2) An insurer's issuance of an annuity subject to subdivision (b)(1) of this section shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.

(c) Supervision system.

(1) Except as permitted under subsection (b) of this section, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives based on the consumer's consumer profile information.

(2) An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer's and its producers' compliance with this part, including, but not limited to, the following:

(A) The insurer shall:

(i) Establish and maintain reasonable procedures to inform its producers of the requirements of this part; and

(ii) Incorporate the requirements of this part into relevant producer training manuals;

(B) The insurer shall:

(i) Establish and maintain standards for producer product training; and

(ii) Establish and maintain reasonable procedures to require its producers to comply with the requirements of 23 CAR § 121-106;

(C) The insurer shall provide product-specific training and training materials that explain all material features of its annuity products to its producers;

(D)(i) The insurer shall establish and maintain procedures for the review of each recommendation prior to issuance of an annuity that are designed to ensure there is a reasonable basis to determine that the recommended annuity would effectively address the particular consumer's:

(a) Financial situation;

(b) Insurance needs; and

(c) Financial objectives.

(ii) Such review procedures may:

(a) Apply a screening system for the purpose of identifying selected transactions for additional review; and

(b) Be accomplished electronically or through other means including, but not limited to, physical review.

(iii) Such an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

(E)(i) The insurer shall establish and maintain reasonable procedures to detect recommendations that are not in compliance with subsections (a), (b), (d), and (e) of this section.

(ii) This may include, but is not limited to:

(a) Confirmation of the consumer's consumer profile information;

(b) Systematic customer surveys;

(c) Producer and consumer interviews;

(d) Confirmation letters;

(e) Producer statements or attestations; and

(f) Programs of internal monitoring.

(iii) Nothing in this subdivision (c)(2)(E) prevents an insurer from complying with this subdivision (c)(2)(E) by applying sampling procedures or by confirming the consumer profile information or other required information under this section after issuance or delivery of the annuity;

(F) The insurer shall establish and maintain reasonable procedures to assess, prior to or upon issuance or delivery of an annuity, whether a producer has provided to the consumer the information required to be provided under this section;

(G) The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;

(H)(i) The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales quotas, bonuses, and noncash compensation that are based on the sales of specific annuities within a limited period of time.

(ii) The requirements of this subdivision (c)(2)(H) are not intended to prohibit the receipt of health insurance, office rent, office support, retirement benefits, or other employee benefits by employees as long as those benefits are not based upon the volume of sales of a specific annuity within a limited period of time; and

(I) The insurer shall annually provide a written report to senior management, including to the senior manager responsible for audit functions, which details a review, with appropriate testing, reasonably designed to determine:

(i) The effectiveness of the supervision system;

(ii) The exceptions found; and

(iii) Corrective action taken or recommended, if any.

(3)(A)(i) Nothing in this subsection restricts an insurer from contracting for performance of a function, including maintenance of procedures, required under this subsection.

(ii) An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to 23 CAR § 121-107 regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with subdivision (c)(3)(B) of this section.

(B)(i) An insurer's supervision system under this subsection shall include supervision of contractual performance under this subsection.

(ii) This includes, but is not limited to, the following:

(a) Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and

(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.

(4) An insurer is not required to include in its system of supervision:

(A) A producer's recommendations to consumers of products other than the annuities offered by the insurer; or

(B) Consideration of or comparison to options available to the producer or compensation relating to those options other than annuities or other products offered by the insurer.

(d) Prohibited practices. Neither a producer nor an insurer shall dissuade or attempt to dissuade a consumer from:

(1) Truthfully responding to an insurer's request for confirmation of the consumer profile information;

(2) Filing a complaint; or

(3) Cooperating with the investigation of a complaint.

(e) Safe harbor.

(1)(A) Recommendations and sales of annuities made in compliance with comparable standards shall satisfy the requirements under this part.

(B) This subsection applies to all recommendations and sales of annuities made by financial professionals in compliance with business rules, controls, and procedures that satisfy a comparable standard even if such standard would not otherwise apply to the product or recommendation at issue.

(C) However, nothing in this subsection shall limit the Insurance Commissioner's ability to investigate and enforce the provisions of this part.

(2) Nothing in subdivision (e)(1) of this section shall limit the insurer's obligation to comply with subdivision (c)(1) of this section, although the insurer may base its analysis on information received from either the financial professional or the entity supervising the financial professional.

(3) For subdivision (e)(1) of this section to apply, an insurer shall:

(A) Monitor the relevant conduct of the financial professional seeking to rely on subdivision (e)(1) of this section or the entity responsible for supervising the financial professional, such as the financial professional's broker-dealer or an investment adviser registered under federal or state securities laws, using information collected in the normal course of an insurer's business; and

(B) Provide to the entity responsible for supervising the financial professional seeking to rely on subdivision (e)(1) of this section such as the financial professional's broker-dealer or investment adviser registered under federal or state securities laws, information and reports that are reasonably appropriate to assist such entity to maintain its supervision system.

(4) For purposes of this subsection, "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 Employee Retirement Income Security Act of 1974 (ERISA) or fiduciary under Section 4975(e)(3) of the Internal Revenue Code or any amendments or successor statutes thereto.

(5) For purposes of this subsection, "comparable standards" means:

(A) With respect to broker-dealers and registered representatives of broker-dealers, applicable United States Securities and Exchange Commission and FINRA rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including, but not limited to, Regulation Best Interest and any amendments or successor regulations thereto;

(B) With respect to investment advisers registered under federal or state securities laws or investment adviser representatives, the fiduciary duties and all other requirements imposed on such investment advisers or investment adviser representatives by contract or under the Investment Advisers Act of 1940 or applicable state securities law, including but not limited to, 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 ERISA or the Internal Revenue Code and any amendments or successor statutes thereto.

History

• Codification Notes: The Employee Retirement Income Security Act of 1974 (ERISA) is codified generally at 29 U.S.C. § 1001 et seq.Regulation Best Interest is codified at 17 C.F.R. § 240.15l-1.The Investment Advisers Act of 1940 is codified at 15 U.S.C. § 80b-1 et seq. Authorities: Arkansas Code § 23-61-108; Arkansas Code § 23-66-207; Arkansas Code § 23-66-307

23 CAR § 121-106 Producer training {#sec-23-car-121-106 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-106}

23 CAR § 121-106. Producer training.

(a)(1) A producer shall not solicit the sale of an annuity product unless the producer:

(A) Has adequate knowledge of the product to recommend the annuity; and

(B) Is in compliance with the insurer's standards for product training.

(2) A producer may rely on insurer-provided product-specific training standards and materials to comply with this subsection.

(b)(1)(A) A producer who engages in the sale of annuity products shall complete a one-time four (4) credit training course approved by the State Insurance Department and provided by the department-approved education provider.

(B)(i) Producers who hold a life insurance line of authority on the effective date of this part and who desire to sell annuities shall complete the requirements of this subsection within six (6) months after the effective date of this part.

(ii) Individuals who obtain a life insurance line of authority on or after the effective date of this part may not engage in the sale of annuities until the annuity training course required under this subsection has been completed.

(2) The minimum length of the training required under this subsection shall be sufficient to qualify for at least four (4) CE credits, but may be longer.

(3) The training required under this subsection shall include information on the following topics:

(A) The types of annuities and various classifications of annuities;

(B) Identification of the parties to an annuity;

(C) How product specific annuity contract features affect consumers;

(D) The application of income taxation of qualified and nonqualified annuities;

(E) The primary uses of annuities; and

(F) Appropriate standard of conduct, sales practices, replacement, and disclosure requirements.

(4)(A) Providers of courses intended to comply with this subsection shall:

(i) Cover all topics listed in the prescribed outline; and

(ii) Not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer's products.

(B) Additional topics may be offered in conjunction with and in addition to the required outline.

(5) A provider of an annuity training course intended to comply with this subsection shall register as a CE provider in this state and comply with the rules and guidelines applicable to producer continuing education courses as set forth in:

(A) Arkansas Code § 23-64-301 et seq.; and

(B) Continuing Education for Producers and Adjusters, 23 CAR pt. 18.

(6) A producer who has completed an annuity training course approved by the department prior to January 1, 2021, shall within six (6) months after January 1, 2021, complete either:

(A) A new four-hour credit training course approved by the department after January 1, 2021; or

(B) An additional one-time one (1) credit training course approved by the department and provided by the department-approved education provider on appropriate sales practices, replacement, and disclosure requirements under this part.

(7) Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with:

(A) Arkansas Code § 23-64-301 et seq.; and

(B) 23 CAR pt. 18.

(8) Providers of annuity training shall comply with the reporting requirements and shall issue certificates of completion in accordance with:

(A) Arkansas Code § 23-64-301 et seq.; and

(B) 23 CAR pt. 18.

(9) The satisfaction of the training requirements of another state that are substantially similar to the provisions of this subsection shall be deemed to satisfy the training requirements of this subsection in this state.

(10) The satisfaction of the components of the training requirements of any course or courses with components substantially similar to the provisions of this subsection shall be deemed to satisfy the training requirements of this subsection in this state.

(11)(A) An insurer shall verify that a producer has completed the annuity training course required under this subsection before allowing the producer to sell an annuity product for that insurer.

(B) An insurer may satisfy its responsibility under this subsection by obtaining certificates of completion of the training course or obtaining reports provided by:

(i) Insurance Commissioner-sponsored database systems or vendors; or

(ii) A reasonably reliable commercial database vendor that has a reporting arrangement with approved insurance education providers.

23 CAR § 121-107 Compliance mitigation — Penalties — Enforcement {#sec-23-car-121-107 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-107}

23 CAR § 121-107. Compliance mitigation — Penalties — Enforcement.

(a)(1) An insurer is responsible for compliance with this part.

(2) If a violation occurs, either because of the action or inaction of the insurer or its producer, the Insurance Commissioner may order:

(A) An insurer to take reasonably appropriate corrective action for any consumer harmed by a failure to comply with this part by:

(i) The insurer;

(ii) An entity contracted to perform the insurer's supervisory duties; or

(iii) The producer;

(B) A general agency, independent agency, or the producer to take reasonably appropriate corrective action for any consumer harmed by the producer's violation of this part; and

(C) Appropriate penalties and sanctions.

(b) Any applicable penalty under the Trade Practices Act, Arkansas Code § 23-66-201 et seq., for a violation of this part may be reduced or eliminated if:

(1) Corrective action for the consumer was taken promptly after a violation was discovered; or

(2) The violation was not part of a pattern or practice.

(c) The authority to enforce compliance with this part is vested exclusively with the commissioner.

23 CAR § 121-108 Recordkeeping {#sec-23-car-121-108 omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR § 121-108}

23 CAR § 121-108. Recordkeeping.

(a)(1) Insurers, general agents, independent agencies, and producers shall maintain or be able to make available to the Insurance Commissioner records of the information collected from the consumer, disclosures made to the consumer, including summaries of oral disclosures, and other information used in making the recommendations that were the basis for insurance transactions for five (5) years after the insurance transaction is completed by the insurer.

(2) An insurer is permitted, but shall not be required, to maintain documentation on behalf of a producer.

(b) Records required to be maintained by this part may be maintained:

(1) In paper, photographic, micro-process, magnetic, mechanical, or electronic media; or

(2) By any process that accurately reproduces the actual document.

23 CAR pt. 121, Appendix A Insurance Agent (Producer) Disclosure for Annuities {#sec-23-car-pt.-121-appendix-a omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR pt. 121, Appendix A}

APPENDIX A INSURANCE AGENT (PRODUCER) DISCLOSURE FOR ANNUITIES Do Not Sign Unless You Have Read and Understand the Information in this Form Date: _____________________________ INSURANCE AGENT (PRODUCER) INFORMATION ("Me", "I", "My") First Name: Last Name: Business \ Agency Name: Website: Business Mailing Address: Business Telephone Number: Email Address: National Producer Number: CUSTOMER INFORMATION ("You", "Your") First Name: Last Name: What Types of Products Can I Sell You? I am licensed to sell annuities to you in accordance with state law. If I recommend that You buy an annuity, it means I believe that it effectively meets Your financial situation, insurance needs, and financial objectives. Other financial products, such as life insurance or stocks, bonds and mutual funds, also may meet Your needs. I offer the following products:  Fixed or Fixed Indexed Annuities  Variable Annuities  Life Insurance I need a separate license to provide advice about or to sell non-insurance financial products. I have checked below any non-insurance financial products that I am licensed and authorized to provide advice about or to sell.  Mutual Funds  Stocks/Bonds  Certificates of Deposit

Whose Annuities Can I Sell to You? I am authorized to sell: ❑ Annuities from only One (1) Insurer ❑ Annuities from Two (2) or More Insurers ❑ Annuities from Two (2) or More Insurers although I primarily sell annuities from:

How I'm Paid for My Work: It's important for You to understand how I'm paid for my work. Depending on the particular annuity You purchase, I may be paid a commission or a fee. Commissions are generally paid to Me by the insurance company while fees are generally paid to Me by the consumer. If You have questions about how I'm paid, please ask Me. Depending on the particular annuity You buy, I will or may be paid cash compensation as follows:  Commission, which is usually paid by the insurance company or other sources. If other sources, describe: _________________________________________________________________________  Fees (such as fixed amount, an hourly rate, or a percentage of your payment), which are usually paid directly by the customer.  Other (Describe): __________________________________________________________________ If you have questions about the above compensation I will be paid for this transaction, please ask me. I may also receive other indirect compensation resulting from this transaction (sometimes called "non-cash" compensation), such as health or retirement benefits, office rent and support, or other incentives from the insurance company or other sources. Note: This disclosure may be adapted to fit the particular business model of the producer. As an example, if the producer only receives commission or only receives a fee from the consumer, the disclosure may be refined to fit that particular situation. This form is intended to provide an example of how to communicate producer compensation, but compliance with the regulation may also be achieved with more precise disclosure, including a written consulting, advising or financial planning agreement. Note: The acknowledgement and signature should be in immediate proximity to the disclosure language. By signing below, you acknowledge that you have read and understand the information provided to you in this document. Customer Signature Agent (Producer Signature Date Date

23 CAR pt. 121, Appendix B Consumer Refusal to Provide Information {#sec-23-car-pt.-121-appendix-b omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR pt. 121, Appendix B}

APPENDIX B CONSUMER REFUSAL TO PROVIDE INFORMATION Do Not Sign Unless You Have Read and Understand the Information in this Form Why are you being given this form? You're buying a financial product — an annuity. To recommend a product that effectively meets your needs, objectives and situation, the agent, broker, or company needs information about you, your financial situation, insurance needs and financial objectives. If you sign this form, it means you have not given the agent, broker, or company some or all the information needed to decide if the annuity effectively meets your needs, objectives and situation. You may lose protections under the Arkansas Insurance Code if you sign this form or provide inaccurate information. Statement of Purchaser:  I REFUSE to provide this information at this time.  I have chosen to provide LIMITED information at this time Customer Signature Date

23 CAR pt. 121, Appendix C Consumer Decision to Purchase an Annuity NOT Based on a Recommendation {#sec-23-car-pt.-121-appendix-c omnilex-key=us-ar-regs-official--title-23-part-121--23 CAR pt. 121, Appendix C}

APPENDIX C Consumer Decision to Purchase an Annuity NOT Based on a Recommendation Do Not Sign This Form Unless You Have Read and Understand It. Why are you being given this form? You are buying a financial product — an annuity. To recommend a product that effectively meets your needs, objectives and situation, the agent, broker, or company has the responsibility to learn about you, your financial situation, insurance needs and financial objectives. If you sign this form, it means you know that you're buying an annuity that was not recommended. Statement of Purchaser: I understand that I am buying an annuity, but the agent, broker or company did not recommend that I buy it. If I buy it without a recommendation, I understand I may lose protections under the Arkansas Insurance Code. Customer Signature Date Agent/Producer Signature Date