A bill aimed at providing protections for people investing in annuities has been signed into law by California Governor Gavin Newsom, according to ThinkAdvisor.
The legislation was sponsored by State Sen. Bill Dodd, D-Napa, in partnership with California Insurance Commissioner Ricardo Lara. It requires insurance producers and insurance companies to strengthen suitability standards for the sale of annuities. The bill would ensure California meets federal and national model standards, while providing additional consumer protections.
“The goal is to prevent the sale of these financial products to people who do not understand them or would not benefit from them,” said Dodd.
The measure, State Senate Bill 263, adopts the National Association of Insurance Commissioners’ annuity sales standard update. It makes California the 44th state to adopt the NAIC model update, which is based on the Securities and Exchange Commission’s Regulation Best Interest.
Sellers of annuities will be required to act in the best interest of consumers and disclose potential conflicts of interest. Sellers will not be required to act as a fiduciary or refrain from collecting sales commissions.
Industry groups pushed for the bill’s passage and were pleased to see it become law.
“Together with the Securities and Exchange Commission’s Regulation Best Interest, which creates a best interest standard for retirement investors in every state, the NAIC model offers robust protections and promotes retirement security for American families,” said Kevin Mayeux, CEO of the National Association of Insurance and Financial Advisors. “NAIFA encourages all 50 states to adopt the NAIC model.”
Some consumer advocates called on Newsom to veto the legislation and pushed for the state to adopt the tougher fiduciary definition rule being proposed by the U.S. Department of Labor. It would impose the fiduciary standard of federal retirement law on most investment advisors, brokers, and insurance agents making recommendations to retirement plans and plan participants and customers in individual retirement accounts.
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