The Securities and Exchange Commission have made variable annuities a point of interest in its examination priorities. The popular part of retirement plans are a focus for the SEC in 2016.
Variable annuities are tax-deferred retirement components that allows retirees to choose from a selection of investments, then pays a level of income in retirement that is determined by the performance of the investments chosen by the retiree.
The SEC’S Office of Compliance Inspections and Examinations (OCIE) hope to zoom in on and examine registrants selling variable annuities.
From Lexology.com:
OCIE’s ReTIRE initiative, rolled out in July 2015, provides further insight into what OCIE may look for when conducting examinations of registrants selling variable annuities. The ReTIRE initiative focuses on the reasonable basis for recommendations, conflicts of interest, supervision and compliance controls, and marketing and disclosure practices. Registrants that sell variable annuities should therefore be prepared to provide information and respond to inquiries regarding, inter alia:
- the process for recommending variable annuities to customers;
- the due diligence performed around investment options;
- compensation provided to incent representatives to recommend variable annuities;
- implementation and compliance with controls, oversight and supervisory policies regarding the sale of variable annuities; and
- the content and accuracy of marketing materials.
When OCIE rolled out the ReTIRE initiative, it encouraged registrants “to reflect upon their own practices, policies, and procedures in these areas to promote improvements in their supervisory, oversight, and compliance programs, as deemed appropriate.” In light of OCIE including variable annuities in its 2016 Examination Priorities, registrants that offer variable annuities should pay special heed to this advice.
The OCIE will implement initiatives to determine what investors can risk by investing in variable annuities.
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