<a id="pl.1.3"></a><var>1.3</var>a model regulation adopted by the National Association of Insurance <br/>
<a id="pl.1.4"></a><var>1.4</var>Commissioners relating to suitability in annuity transactions;amending <br/>
<a id="pl.1.5"></a><var>1.5</var>Minnesota Statutes 2010, sections 60K.46, subdivision 4; 60K.56, subdivision 5; <br/>
<a id="pl.1.6"></a><var>1.6</var>72A.20, subdivision 34; proposing coding for new law in Minnesota Statutes, <br/>
<a id="pl.1.7"></a><var>1.7</var>chapter 72A.<br/>
<a id="pl.1.8"></a><var>1.8</var>BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:<br/>
<br/>
<a id="bill.0.1.0"></a><a id="pl.1.9"></a><var>1.9</var>    Section 1. Minnesota Statutes 2010, section 60K.46, subdivision 4, is amended to read:<br/>
<a id="pl.1.10"></a><var>1.10</var>    Subd. 4. <b>Suitability of insurance.</b> In recommending the purchase of any life, <br/>
<a id="pl.1.11"></a><var>1.11</var>endowment, individual accident and sickness, long-term care, annuity, life-endowment, or <br/>
<a id="pl.1.12"></a><var>1.12</var>Medicare supplement insurance to a customer, a producer must have reasonable grounds <br/>
<a id="pl.1.13"></a><var>1.13</var>for believing that the recommendation is suitable for the customer and must make <br/>
<a id="pl.1.14"></a><var>1.14</var>reasonable inquiries to determine suitability. The suitability of a recommended purchase <br/>
<a id="pl.1.15"></a><var>1.15</var>of insurance will be determined by reference to the totality of the particular customer's <br/>
<a id="pl.1.16"></a><var>1.16</var>circumstances, including, but not limited to, the customer's income, the customer's need <br/>
<a id="pl.1.17"></a><var>1.17</var>for insurance, and the values, benefits, and costs of the customer's existing insurance <br/>
<a id="pl.1.18"></a><var>1.18</var>program, if any, when compared to the values, benefits, and costs of the recommended <br/>
<a id="pl.1.19"></a><var>1.19</var>policy or policies. This subdivision does not apply to limited lines insurance under section <br/>
<statute_ref><a id="pl.1.20"></a><var>1.20</var>60K.38, subdivision 1
         </statute_ref>, paragraph (c). Recommendations for the purchase of an annuity <br/>
<a id="pl.1.21"></a><var>1.21</var>are subject to sections 72A.203 to 72A.2036 and not this subdivision.<br/>
<br/>
<a id="bill.0.2.0"></a><a id="pl.1.22"></a><var>1.22</var>    Sec. 2. Minnesota Statutes 2010, section 60K.56, subdivision 5, is amended to read:<br/>
<a id="pl.1.23"></a><var>1.23</var>    Subd. 5. <b>Criteria for course accreditation.</b> (a) The commissioner may accredit a <br/>
<a id="pl.1.24"></a><var>1.24</var>course only to the extent it is designed to impart substantive and procedural knowledge of <br/>
<a id="pl.2.1"></a><var>2.1</var>the insurance field. The burden of demonstrating that the course satisfies this requirement <br/>
<a id="pl.2.2"></a><var>2.2</var>is on the individual or organization seeking accreditation. The commissioner is authorized <br/>
<a id="pl.2.3"></a><var>2.3</var>to establish a procedure for renewal of course accreditation.<br/>
<a id="pl.2.4"></a><var>2.4</var>(b) The commissioner shall approve or disapprove professional designation <br/>
<a id="pl.2.5"></a><var>2.5</var>examinations that are recommended for approval by the advisory task force. In order <br/>
<a id="pl.2.6"></a><var>2.6</var>for an insurance producer to receive full continuing education credit for a professional <br/>
<a id="pl.2.7"></a><var>2.7</var>designation examination, the producer must pass the examination. A producer may <br/>
<a id="pl.2.8"></a><var>2.8</var>not receive credit for classroom instruction preparing for the professional designation <br/>
<a id="pl.2.9"></a><var>2.9</var>examination and also receive continuing education credit for passing the professional <br/>
<a id="pl.2.10"></a><var>2.10</var>designation examination.<br/>
<a id="pl.2.11"></a><var>2.11</var>(c) The commissioner shall approve continuing education courses offered by <br/>
<a id="pl.2.12"></a><var>2.12</var>accredited institutions of higher education that are approved education providers under <br/>
<a id="pl.2.13"></a><var>2.13</var>chapter 45 that impart substantive and procedural knowledge of the insurance field. <br/>
<a id="pl.2.14"></a><var>2.14</var>Continuing education courses offered by accredited institutions of higher education <br/>
<a id="pl.2.15"></a><var>2.15</var>that are approved education providers under chapter 45 shall not be considered <br/>
<a id="pl.2.16"></a><var>2.16</var>company-sponsored courses unless attendance is restricted to producers of one or more <br/>
<a id="pl.2.17"></a><var>2.17</var>companies or their affiliates.<br/>
<br/>
<a id="bill.0.3.0"></a><a id="pl.2.18"></a><var>2.18</var>    Sec. 3. Minnesota Statutes 2010, section 72A.20, subdivision 34, is amended to read:<br/>
<a id="pl.2.19"></a><var>2.19</var>    Subd. 34. <b>Suitability of insurance for customer.</b> In recommending or issuing life, <br/>
<a id="pl.2.20"></a><var>2.20</var>endowment, individual accident and sickness, long-term care, annuity, life-endowment, or <br/>
<a id="pl.2.21"></a><var>2.21</var>Medicare supplement insurance to a customer, an insurer, either directly or through its <br/>
<a id="pl.2.22"></a><var>2.22</var>agent, must have reasonable grounds for believing that the recommendation is suitable for <br/>
<a id="pl.2.23"></a><var>2.23</var>the customer.<br/>
<a id="pl.2.24"></a><var>2.24</var>In the case of group insurance marketed on a direct response basis without the use of <br/>
<a id="pl.2.25"></a><var>2.25</var>direct agent contact, this subdivision is satisfied if the insurer has reasonable grounds to <br/>
<a id="pl.2.26"></a><var>2.26</var>believe that the insurance offered is generally suitable for the group to whom the offer is <br/>
<a id="pl.2.27"></a><var>2.27</var>made. Sections 72A.203 to 72A.2036, and not this subdivision, apply to recommending <br/>
<a id="pl.2.28"></a><var>2.28</var>and issuing an annuity.<br/>
<br/>
<a id="bill.0.4.0"></a><a id="pl.2.29"></a><var>2.29</var>    Sec. 4. <b>[72A.203] EXEMPTIONS.</b><br/>
<a id="pl.2.30"></a><var>2.30</var>Unless otherwise specifically included, sections 72A.203 to 72A.2036 do not apply <br/>
<a id="pl.2.31"></a><var>2.31</var>to transactions involving:<br/>
<a id="pl.2.32"></a><var>2.32</var>(1) direct response solicitations where there is no recommendation based on <br/>
<a id="pl.2.33"></a><var>2.33</var>information collected from the consumer pursuant to sections 72A.203 to 72A.2036; <br/>
<a id="pl.2.34"></a><var>2.34</var>(2) contracts used to fund group plans under:<br/>
<a id="pl.3.1"></a><var>3.1</var>(i) an employee pension or welfare benefit plan that is covered by the Employee <br/>
<a id="pl.3.2"></a><var>3.2</var>Retirement and Income Security Act of 1974 (ERISA) title 29, United States Code, <br/>
<a id="pl.3.3"></a><var>3.3</var>sections 1001 to 1461;<br/>
<a id="pl.3.4"></a><var>3.4</var>(ii) a plan described by section 401(a), 401(k), 403(b), 408(k), or 408(p) of the <br/>
<a id="pl.3.5"></a><var>3.5</var>Internal Revenue Code of 1986 (IRC); as amended, if established or maintained by an <br/>
<a id="pl.3.6"></a><var>3.6</var>employer;<br/>
<a id="pl.3.7"></a><var>3.7</var>(iii) a government or church plan defined in section 414 of the Internal Revenue <br/>
<a id="pl.3.8"></a><var>3.8</var>Code of 1986 as amended, a government or church welfare benefit plan, or a deferred <br/>
<a id="pl.3.9"></a><var>3.9</var>compensation plan of a state or local government or tax exempt organization under section <br/>
<a id="pl.3.10"></a><var>3.10</var>457 of the Internal Revenue Code of 1986, as amended; or<br/>
<a id="pl.3.11"></a><var>3.11</var>(iv) a nonqualified deferred compensation arrangement established or maintained by <br/>
<a id="pl.3.12"></a><var>3.12</var>an employer or plan sponsor; and<br/>
<a id="pl.3.13"></a><var>3.13</var>(3) contracts used to fund, unless there is a recommendation to a consumer regarding <br/>
<a id="pl.3.14"></a><var>3.14</var>an annuity in which case sections 72A.203 to 72A.2036 do apply with respect to the <br/>
<a id="pl.3.15"></a><var>3.15</var>consumer annuity transaction:<br/>
<a id="pl.3.16"></a><var>3.16</var>(i) settlements of or assumptions of liabilities associated with personal injury <br/>
<a id="pl.3.17"></a><var>3.17</var>litigation or a dispute or claim resolution process; or<br/>
<a id="pl.3.18"></a><var>3.18</var>(ii) formal prepaid funeral contracts.<br/>
<br/>
<a id="bill.0.5.0"></a><a id="pl.3.19"></a><var>3.19</var>    Sec. 5. <b>[72A.2031] DEFINITIONS.</b><br/>
<a id="pl.3.20"></a><var>3.20</var>    Subdivision 1. <b>Definitions.</b> For purposes of sections 72A.203 to 72A.2036, the <br/>
<a id="pl.3.21"></a><var>3.21</var>terms defined in this section have the meanings given them.<br/>
<a id="pl.3.22"></a><var>3.22</var>    Subd. 2. <b>Annuity.</b> "Annuity" means an annuity that is an insurance product under <br/>
<a id="pl.3.23"></a><var>3.23</var>state law that is individually solicited, whether the product is classified as an individual or <br/>
<a id="pl.3.24"></a><var>3.24</var>group annuity.<br/>
<a id="pl.3.25"></a><var>3.25</var>    Subd. 3. <b>Continuing education credit or CE credit.</b> "Continuing education credit" <br/>
<a id="pl.3.26"></a><var>3.26</var>or "CE credit" means one continuing education credit earned pursuant to section 45.30, <br/>
<a id="pl.3.27"></a><var>3.27</var>subdivision 4.<br/>
<a id="pl.3.28"></a><var>3.28</var>    Subd. 4. <b>Continuing education provider or CE provider.</b> "Continuing education <br/>
<a id="pl.3.29"></a><var>3.29</var>provider" or "CE provider" means an approved education provider under chapter 45.<br/>
<a id="pl.3.30"></a><var>3.30</var>    Subd. 5. <b>FINRA.</b> "FINRA" means the Financial Industry Regulatory Authority <br/>
<a id="pl.3.31"></a><var>3.31</var>or a succeeding agency.<br/>
<a id="pl.3.32"></a><var>3.32</var>    Subd. 6. <b>Insurer.</b> "Insurer" means a company required to be licensed under the laws <br/>
<a id="pl.3.33"></a><var>3.33</var>of this state to provide insurance products, including annuities.<br/>
<a id="pl.4.1"></a><var>4.1</var>    Subd. 7. <b>Insurance producer.</b> "Insurance producer" means a person required to <br/>
<a id="pl.4.2"></a><var>4.2</var>be licensed under the laws of this state to sell, solicit, or negotiate insurance, including <br/>
<a id="pl.4.3"></a><var>4.3</var>annuities.<br/>
<a id="pl.4.4"></a><var>4.4</var>    Subd. 8. <b>Replacement.</b> "Replacement" means a transaction in which a new policy or <br/>
<a id="pl.4.5"></a><var>4.5</var>contract is to be purchased, and it is known or should be known to the proposing producer, <br/>
<a id="pl.4.6"></a><var>4.6</var>or the proposing insurer, whether or not there is an insurance producer, that by reason of <br/>
<a id="pl.4.7"></a><var>4.7</var>the transaction, an existing policy or contract has been or is to be any of the following:<br/>
<a id="pl.4.8"></a><var>4.8</var>(1) lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing <br/>
<a id="pl.4.9"></a><var>4.9</var>insurer, or otherwise terminated;<br/>
<a id="pl.4.10"></a><var>4.10</var>(2) converted to reduced paid-up insurance; continued as extended term insurance, <br/>
<a id="pl.4.11"></a><var>4.11</var>or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;<br/>
<a id="pl.4.12"></a><var>4.12</var>(3) amended so as to effect either a reduction in benefits or in the term for which <br/>
<a id="pl.4.13"></a><var>4.13</var>coverage would otherwise remain in force or for which benefits would be paid;<br/>
<a id="pl.4.14"></a><var>4.14</var>(4) reissued with any reduction in cash value; or<br/>
<a id="pl.4.15"></a><var>4.15</var>(5) used in a financed purchase.<br/>
<a id="pl.4.16"></a><var>4.16</var>    Subd. 9. <b>Suitability information.</b> "Suitability information" means information that <br/>
<a id="pl.4.17"></a><var>4.17</var>is reasonably appropriate to determine the suitability of a recommendation, including <br/>
<a id="pl.4.18"></a><var>4.18</var>but not limited to the following:<br/>
<a id="pl.4.19"></a><var>4.19</var>(1) age;<br/>
<a id="pl.4.20"></a><var>4.20</var>(2) annual income and anticipated material changes in annual income;<br/>
<a id="pl.4.21"></a><var>4.21</var>(3) financial situation and needs, including the financial resources used for the <br/>
<a id="pl.4.22"></a><var>4.22</var>funding of the annuity, and including anticipated material changes in financial situation <br/>
<a id="pl.4.23"></a><var>4.23</var>and needs;<br/>
<a id="pl.4.24"></a><var>4.24</var>(4) financial experience;<br/>
<a id="pl.4.25"></a><var>4.25</var>(5) financial objectives;<br/>
<a id="pl.4.26"></a><var>4.26</var>(6) intended use of the annuity;<br/>
<a id="pl.4.27"></a><var>4.27</var>(7) financial time horizon;<br/>
<a id="pl.4.28"></a><var>4.28</var>(8) existing assets, including investment and life insurance holdings and anticipated <br/>
<a id="pl.4.29"></a><var>4.29</var>material changes in existing assets;<br/>
<a id="pl.4.30"></a><var>4.30</var>(9) liquidity needs and anticipated material changes in liquidity needs;<br/>
<a id="pl.4.31"></a><var>4.31</var>(10) liquid net worth and anticipated material changes in liquid net worth;<br/>
<a id="pl.4.32"></a><var>4.32</var>(11) risk tolerance; <br/>
<a id="pl.4.33"></a><var>4.33</var>(12) tax status; and<br/>
<a id="pl.4.34"></a><var>4.34</var>(13) whether or not the consumer has a reverse mortgage.<br/>
<br/>
<a id="bill.0.6.0"></a><a id="pl.4.35"></a><var>4.35</var>    Sec. 6. <b>[72A.2032] DUTIES OF INSURERS AND INSURANCE PRODUCERS.</b><br/>
<a id="pl.5.1"></a><var>5.1</var>    Subdivision 1. <b>Suitability standard.</b> In recommending to a consumer the purchase <br/>
<a id="pl.5.2"></a><var>5.2</var>of an annuity or the exchange of an annuity that results in another insurance transaction or <br/>
<a id="pl.5.3"></a><var>5.3</var>series of insurance transactions, the insurance producer, or the insurer where no producer <br/>
<a id="pl.5.4"></a><var>5.4</var>is involved, shall have reasonable grounds for believing, after a reasonable inquiry, that <br/>
<a id="pl.5.5"></a><var>5.5</var>the recommendation is suitable for the consumer, under the totality of the circumstances <br/>
<a id="pl.5.6"></a><var>5.6</var>based on the facts disclosed by the consumer as to the consumer's investments and other <br/>
<a id="pl.5.7"></a><var>5.7</var>insurance products and as to the consumer's financial situation and needs, including the <br/>
<a id="pl.5.8"></a><var>5.8</var>consumer's suitability information, and that there is a reasonable basis to believe all of <br/>
<a id="pl.5.9"></a><var>5.9</var>the following:<br/>
<a id="pl.5.10"></a><var>5.10</var>(1) the consumer has been reasonably informed of various features of the annuity, <br/>
<a id="pl.5.11"></a><var>5.11</var>such as the potential surrender period and surrender charge, potential tax penalty if the <br/>
<a id="pl.5.12"></a><var>5.12</var>consumer sells, exchanges, surrenders, redeems, or annuitizes the annuity, mortality and <br/>
<a id="pl.5.13"></a><var>5.13</var>expense fees, investment advisory fees, potential charges for and features of riders, <br/>
<a id="pl.5.14"></a><var>5.14</var>limitations on interest returns, insurance and investment components, and market risk;<br/>
<a id="pl.5.15"></a><var>5.15</var>(2) the consumer would receive a tangible net benefit from the transaction;<br/>
<a id="pl.5.16"></a><var>5.16</var>(3) the particular annuity as a whole, the underlying subaccounts to which funds are <br/>
<a id="pl.5.17"></a><var>5.17</var>allocated at the time of purchase or exchange of the annuity, and riders and similar product <br/>
<a id="pl.5.18"></a><var>5.18</var>enhancements, if any, are suitable; and in the case of an exchange or replacement, the <br/>
<a id="pl.5.19"></a><var>5.19</var>transaction as a whole is suitable taking into account, among other things, the age of the <br/>
<a id="pl.5.20"></a><var>5.20</var>consumer; for the particular consumer based on the consumer's suitability information; and<br/>
<a id="pl.5.21"></a><var>5.21</var>(4) in the case of an exchange or replacement of an annuity, the exchange or <br/>
<a id="pl.5.22"></a><var>5.22</var>replacement is suitable including taking into consideration all of the following:<br/>
<a id="pl.5.23"></a><var>5.23</var>(i) the consumer will incur a surrender charge; be subject to the commencement of a <br/>
<a id="pl.5.24"></a><var>5.24</var>new surrender period; lose existing benefits, such as death, living, or other contractual <br/>
<a id="pl.5.25"></a><var>5.25</var>benefits; or be subject to increased fees, investment advisory fees, or charges for riders <br/>
<a id="pl.5.26"></a><var>5.26</var>and similar product enhancements;<br/>
<a id="pl.5.27"></a><var>5.27</var>(ii) the consumer would receive a tangible net benefit from the transaction, and <br/>
<a id="pl.5.28"></a><var>5.28</var>in the case of a person 65 years of age or older, neither a producer nor an insurer shall <br/>
<a id="pl.5.29"></a><var>5.29</var>recommend a replacement or exchange of an annuity that requires the insured to pay <br/>
<a id="pl.5.30"></a><var>5.30</var>a surrender charge for the annuity being replaced or exchanged if the replacement or <br/>
<a id="pl.5.31"></a><var>5.31</var>exchange does not confer a substantial financial benefit over the life of the annuity to the <br/>
<a id="pl.5.32"></a><var>5.32</var>consumer so that a reasonable person would believe the purchase is unnecessary; and<br/>
<a id="pl.5.33"></a><var>5.33</var>(iii) the consumer has had another annuity exchange or replacement and, in <br/>
<a id="pl.5.34"></a><var>5.34</var>particular, an exchange or replacement within the preceding 60 months.<br/>
<a id="pl.5.35"></a><var>5.35</var>    Subd. 2. <b>Obtaining suitability information.</b> Before the execution of a purchase, <br/>
<a id="pl.5.36"></a><var>5.36</var>exchange, or replacement of an annuity resulting from a recommendation, an insurance <br/>
<a id="pl.6.1"></a><var>6.1</var>producer, or an insurer where no producer is involved, shall make reasonable efforts to <br/>
<a id="pl.6.2"></a><var>6.2</var>obtain the consumer's suitability information, and record this information on a form, <br/>
<a id="pl.6.3"></a><var>6.3</var>inventory, or similar record.<br/>
<a id="pl.6.4"></a><var>6.4</var>    Subd. 3. <b>Restriction on issuance of annuity.</b> Except as permitted under subdivision <br/>
<a id="pl.6.5"></a><var>6.5</var>4, an insurer shall not issue an annuity recommended to a consumer unless there is a <br/>
<a id="pl.6.6"></a><var>6.6</var>reasonable basis to believe the annuity is suitable based on the consumer's suitability <br/>
<a id="pl.6.7"></a><var>6.7</var>information.<br/>
<a id="pl.6.8"></a><var>6.8</var>    Subd. 4. <b>Exception.</b> (a) Except as provided under paragraph (b), an insurance <br/>
<a id="pl.6.9"></a><var>6.9</var>producer, or an insurer, does not have any obligation to a consumer under subdivision 1 <br/>
<a id="pl.6.10"></a><var>6.10</var>or 3 related to an annuity transaction if:<br/>
<a id="pl.6.11"></a><var>6.11</var>(1) no recommendation is made;<br/>
<a id="pl.6.12"></a><var>6.12</var>(2) a recommendation was made and was later found to have been prepared based on <br/>
<a id="pl.6.13"></a><var>6.13</var>materially inaccurate information provided by the consumer; or<br/>
<a id="pl.6.14"></a><var>6.14</var>(3) a consumer refuses to provide relevant suitability information and the annuity <br/>
<a id="pl.6.15"></a><var>6.15</var>transaction is not recommended.<br/>
<a id="pl.6.16"></a><var>6.16</var>(b) An insurer's issuance of an annuity subject to paragraph (a) shall be reasonable <br/>
<a id="pl.6.17"></a><var>6.17</var>under all the circumstances actually known, or which after reasonable inquiry should be <br/>
<a id="pl.6.18"></a><var>6.18</var>known to the insurer or the insurance producer, at the time the annuity is issued.<br/>
<a id="pl.6.19"></a><var>6.19</var>    Subd. 5. <b>Documentation.</b> An insurance producer or, where no insurance producer <br/>
<a id="pl.6.20"></a><var>6.20</var>is involved, the responsible insurer representative, shall at the time of sale:<br/>
<a id="pl.6.21"></a><var>6.21</var>(1) make a record of any recommendation subject to subdivision 1;<br/>
<a id="pl.6.22"></a><var>6.22</var>(2) obtain a customer signed statement documenting a customer's refusal to provide <br/>
<a id="pl.6.23"></a><var>6.23</var>suitability information, if any; and<br/>
<a id="pl.6.24"></a><var>6.24</var>(3) obtain a customer signed statement acknowledging that an annuity transaction <br/>
<a id="pl.6.25"></a><var>6.25</var>is not recommended if a customer decides to enter into an annuity transaction that is not <br/>
<a id="pl.6.26"></a><var>6.26</var>based on the insurance producer's or insurer's recommendation.<br/>
<a id="pl.6.27"></a><var>6.27</var>    Subd. 6. <b>Supervision system.</b> (a) An insurer shall establish a supervision system <br/>
<a id="pl.6.28"></a><var>6.28</var>that is reasonably designed to achieve the insurer's and its insurance producers' compliance <br/>
<a id="pl.6.29"></a><var>6.29</var>with sections 72A.203 to 72A.2036, including, but not limited to, all of the following:<br/>
<a id="pl.6.30"></a><var>6.30</var>(1) the insurer shall maintain reasonable procedures to inform its insurance <br/>
<a id="pl.6.31"></a><var>6.31</var>producers of the requirements of sections 72A.203 to 72A.2036 and shall incorporate the <br/>
<a id="pl.6.32"></a><var>6.32</var>requirements of sections 72A.203 to 72A.2036 into relevant insurance producer training <br/>
<a id="pl.6.33"></a><var>6.33</var>programs and manuals;<br/>
<a id="pl.6.34"></a><var>6.34</var>(2) the insurer shall establish standards for insurance producer product training <br/>
<a id="pl.6.35"></a><var>6.35</var>and shall maintain reasonable procedures to require its insurance producers to comply <br/>
<a id="pl.6.36"></a><var>6.36</var>with the requirements of section 72A.2033;<br/>
<a id="pl.7.1"></a><var>7.1</var>(3) the insurer shall provide product-specific training and training materials which <br/>
<a id="pl.7.2"></a><var>7.2</var>explain all material features of its annuity products to its insurance producers;<br/>
<a id="pl.7.3"></a><var>7.3</var>(4) the insurer shall maintain procedures for review of each recommendation <br/>
<a id="pl.7.4"></a><var>7.4</var>before issuance of an annuity that are designed to ensure that there is a reasonable basis <br/>
<a id="pl.7.5"></a><var>7.5</var>to determine that a recommendation is suitable. The review procedures shall apply a <br/>
<a id="pl.7.6"></a><var>7.6</var>screening system for the purpose of identifying selected transactions for additional review <br/>
<a id="pl.7.7"></a><var>7.7</var>and may be accomplished electronically or through other means including, but not limited <br/>
<a id="pl.7.8"></a><var>7.8</var>to, physical review. The electronic or other system shall be designed to require additional <br/>
<a id="pl.7.9"></a><var>7.9</var>or elevated review of those transactions identified for additional elevated review on the <br/>
<a id="pl.7.10"></a><var>7.10</var>basis of the advanced age of the consumer, liquidity, and income;<br/>
<a id="pl.7.11"></a><var>7.11</var>(5) the insurer shall maintain reasonable procedures to detect recommendations <br/>
<a id="pl.7.12"></a><var>7.12</var>that are not suitable. This may include, but is not limited to, confirmation of consumer <br/>
<a id="pl.7.13"></a><var>7.13</var>suitability information, systematic customer surveys, interviews, confirmation letters, <br/>
<a id="pl.7.14"></a><var>7.14</var>and programs of internal monitoring. Nothing in this clause prevents an insurer from <br/>
<a id="pl.7.15"></a><var>7.15</var>complying with this clause by applying sampling procedures, or by confirming suitability <br/>
<a id="pl.7.16"></a><var>7.16</var>information after issuance or delivery of the annuity; and<br/>
<a id="pl.7.17"></a><var>7.17</var>(6) the insurer shall annually provide a report to senior management, including to the <br/>
<a id="pl.7.18"></a><var>7.18</var>senior manager responsible for audit functions, which details a review, with appropriate <br/>
<a id="pl.7.19"></a><var>7.19</var>testing, reasonably designed to determine the effectiveness of the supervision system, the <br/>
<a id="pl.7.20"></a><var>7.20</var>exceptions found, and corrective action taken or recommended, if any.<br/>
<a id="pl.7.21"></a><var>7.21</var>(b)(1) Nothing in this subdivision restricts an insurer from contracting for <br/>
<a id="pl.7.22"></a><var>7.22</var>performance of a function, including maintenance of procedures, required under paragraph <br/>
<a id="pl.7.23"></a><var>7.23</var>(a). An insurer is responsible for taking appropriate corrective action and may be subject <br/>
<a id="pl.7.24"></a><var>7.24</var>to sanctions and penalties pursuant to section 72A.2034 regardless of whether the insurer <br/>
<a id="pl.7.25"></a><var>7.25</var>contracts for performance of a function and regardless of the insurer's compliance with <br/>
<a id="pl.7.26"></a><var>7.26</var>subdivision 2, and an insurer is responsible for the compliance of an insurance producer <br/>
<a id="pl.7.27"></a><var>7.27</var>with the provisions of sections 72A.203 to 72A.2036 regardless of whether the insurer <br/>
<a id="pl.7.28"></a><var>7.28</var>contracts for performance of a function required under this paragraph; and<br/>
<a id="pl.7.29"></a><var>7.29</var>(2) an insurer's supervision system under paragraph (a) must include supervision <br/>
<a id="pl.7.30"></a><var>7.30</var>of contractual performance under this clause. This includes, but is not limited to, the <br/>
<a id="pl.7.31"></a><var>7.31</var>following:<br/>
<a id="pl.7.32"></a><var>7.32</var>(i) monitoring and, as appropriate, conducting audits to assure that the contracted <br/>
<a id="pl.7.33"></a><var>7.33</var>function is properly performed; and<br/>
<a id="pl.7.34"></a><var>7.34</var>(ii) annually obtaining a certification from a senior manager who has responsibility <br/>
<a id="pl.7.35"></a><var>7.35</var>for the contracted function that the manager has a reasonable basis to represent, and does <br/>
<a id="pl.7.36"></a><var>7.36</var>represent, that the function is properly performed.<br/>
<a id="pl.8.1"></a><var>8.1</var>(c) An insurer is not required to include in its system of supervision an insurance <br/>
<a id="pl.8.2"></a><var>8.2</var>producer's recommendations to consumers of products other than the annuities offered <br/>
<a id="pl.8.3"></a><var>8.3</var>by the insurer.<br/>
<a id="pl.8.4"></a><var>8.4</var>    Subd. 7. <b>Undue influence.</b> An insurance producer or insurer shall not dissuade, <br/>
<a id="pl.8.5"></a><var>8.5</var>or attempt to dissuade, a consumer from:<br/>
<a id="pl.8.6"></a><var>8.6</var>(1) providing suitability information to the insurance producer or insurer and <br/>
<a id="pl.8.7"></a><var>8.7</var>truthfully responding to an insurer's request for confirmation of suitability information;<br/>
<a id="pl.8.8"></a><var>8.8</var>(2) filing a complaint; or<br/>
<a id="pl.8.9"></a><var>8.9</var>(3) cooperating with the investigation of a complaint.<br/>
<a id="pl.8.10"></a><var>8.10</var>    Subd. 8. <b>FINRA compliance.</b> (a) Certain sales made by a broker-dealer in <br/>
<a id="pl.8.11"></a><var>8.11</var>compliance with FINRA requirements pertaining to suitability and supervision of <br/>
<a id="pl.8.12"></a><var>8.12</var>annuity transactions satisfy the requirements under sections 72A.203 to 72A.2036. This <br/>
<a id="pl.8.13"></a><var>8.13</var>subdivision applies to FINRA broker-dealer sales of variable annuities and fixed annuities <br/>
<a id="pl.8.14"></a><var>8.14</var>if the suitability and supervision is no less stringent than to those applied to variable <br/>
<a id="pl.8.15"></a><var>8.15</var>annuity sales under FINRA requirements. However, nothing in this subdivision limits <br/>
<a id="pl.8.16"></a><var>8.16</var>the commissioner of commerce's ability to enforce the provisions of sections 72A.203 <br/>
<a id="pl.8.17"></a><var>8.17</var>to 72A.2036 with respect to sales made in compliance with FINRA requirements and <br/>
<a id="pl.8.18"></a><var>8.18</var>federal law. In addition, nothing in this subdivision limits the responsibilities of the <br/>
<a id="pl.8.19"></a><var>8.19</var>insurer to monitor the broker-dealer as provided in this subdivision. The insurer remains <br/>
<a id="pl.8.20"></a><var>8.20</var>responsible for the suitability of every transaction and must take reasonably appropriate <br/>
<a id="pl.8.21"></a><var>8.21</var>corrective action for any consumer harmed by violation of law and is subject to the penalty <br/>
<a id="pl.8.22"></a><var>8.22</var>provisions described in section 72A.2034, subdivision 1.<br/>
<a id="pl.8.23"></a><var>8.23</var>(b) For paragraph (a) to apply, an insurer shall:<br/>
<a id="pl.8.24"></a><var>8.24</var>(1) monitor the FINRA member broker-dealer using information collected in the <br/>
<a id="pl.8.25"></a><var>8.25</var>normal course of an insurer's business; and<br/>
<a id="pl.8.26"></a><var>8.26</var>(2) provide to the FINRA member broker-dealer information and reports that <br/>
<a id="pl.8.27"></a><var>8.27</var>are reasonably appropriate to assist the FINRA member broker-dealer to maintain its <br/>
<a id="pl.8.28"></a><var>8.28</var>supervision system.<br/>
<br/>
<a id="bill.0.7.0"></a><a id="pl.8.29"></a><var>8.29</var>    Sec. 7. <b>[72A.2033] INSURANCE PRODUCER TRAINING.</b><br/>
<a id="pl.8.30"></a><var>8.30</var>    Subdivision 1. <b>Requirement.</b> An insurance producer shall not solicit the sale of an <br/>
<a id="pl.8.31"></a><var>8.31</var>annuity product unless the insurance producer has adequate knowledge of the product to <br/>
<a id="pl.8.32"></a><var>8.32</var>recommend the annuity and the insurance producer is in compliance with the insurer's <br/>
<a id="pl.8.33"></a><var>8.33</var>standards for product training. An insurance producer may rely on insurer-provided <br/>
<a id="pl.8.34"></a><var>8.34</var>product-specific training standards and materials to comply with this subdivision.<br/>
<a id="pl.9.1"></a><var>9.1</var>    Subd. 2. <b>Initial training.</b> (a) An insurance producer who is otherwise entitled to <br/>
<a id="pl.9.2"></a><var>9.2</var>engage in the sale of annuity products shall complete a onetime four-credit training course <br/>
<a id="pl.9.3"></a><var>9.3</var>approved by the commissioner and provided by a continuing education provider approved <br/>
<a id="pl.9.4"></a><var>9.4</var>by the commissioner prior to commencing the transaction of annuities.<br/>
<a id="pl.9.5"></a><var>9.5</var>Insurance producers who hold a life insurance line of authority on the effective <br/>
<a id="pl.9.6"></a><var>9.6</var>date of sections 72A.203 to 72A.2036 and who desire to sell annuities shall complete <br/>
<a id="pl.9.7"></a><var>9.7</var>the requirements of this subdivision no later than six months after January 1, 2013. <br/>
<a id="pl.9.8"></a><var>9.8</var>Individuals who obtain a life insurance line of authority on or after January 1, 2013, may <br/>
<a id="pl.9.9"></a><var>9.9</var>not engage in the sale of annuities until the annuity training course required under this <br/>
<a id="pl.9.10"></a><var>9.10</var>subdivision has been completed. Producers licensed on or after January 1, 2013, have <br/>
<a id="pl.9.11"></a><var>9.11</var>until June 30, 2013, to complete the course.<br/>
<a id="pl.9.12"></a><var>9.12</var>(b) The length of the training required under this subdivision must be four continuing <br/>
<a id="pl.9.13"></a><var>9.13</var>education hours.<br/>
<a id="pl.9.14"></a><var>9.14</var>(c) The training required under this subdivision must include information on the <br/>
<a id="pl.9.15"></a><var>9.15</var>following topics:<br/>
<a id="pl.9.16"></a><var>9.16</var>(1) the types of annuities and various classifications of annuities;<br/>
<a id="pl.9.17"></a><var>9.17</var>(2) identification of the parties to an annuity;<br/>
<a id="pl.9.18"></a><var>9.18</var>(3) how fixed, variable, and indexed annuity contract provisions affect consumers;<br/>
<a id="pl.9.19"></a><var>9.19</var>(4) the application of income taxation of qualified and nonqualified annuities;<br/>
<a id="pl.9.20"></a><var>9.20</var>(5) the primary uses of annuities; <br/>
<a id="pl.9.21"></a><var>9.21</var>(6) appropriate and lawful sales practices, replacement, and disclosure requirements, <br/>
<a id="pl.9.22"></a><var>9.22</var>and suitability information and whether an annuity is suitable for a consumer; and<br/>
<a id="pl.9.23"></a><var>9.23</var>(7) the recognition of indicators that a prospective insured may lack the short-term <br/>
<a id="pl.9.24"></a><var>9.24</var>memory or judgment to knowingly purchase an insurance product.<br/>
<a id="pl.9.25"></a><var>9.25</var>(d) Providers of courses intended to comply with this subdivision shall cover all <br/>
<a id="pl.9.26"></a><var>9.26</var>topics listed in the prescribed outline and shall not present any marketing information or <br/>
<a id="pl.9.27"></a><var>9.27</var>provide training on sales techniques or provide specific information about a particular <br/>
<a id="pl.9.28"></a><var>9.28</var>insurer's products.<br/>
<a id="pl.9.29"></a><var>9.29</var>(e) A provider of an annuity training course intended to comply with this subdivision <br/>
<a id="pl.9.30"></a><var>9.30</var>must be an approved continuing education provider in this state and comply with the <br/>
<a id="pl.9.31"></a><var>9.31</var>requirements applicable to insurance producer continuing education courses.<br/>
<a id="pl.9.32"></a><var>9.32</var>(f) Annuity training courses may be conducted and completed by classroom or <br/>
<a id="pl.9.33"></a><var>9.33</var>self-study methods in accordance with chapter 45. In order to assist compliance with this <br/>
<a id="pl.9.34"></a><var>9.34</var>section, all courses approved by the commissioner for the purposes of this section shall be <br/>
<a id="pl.9.35"></a><var>9.35</var>given the course title "Annuity Suitability and Disclosure." Only courses satisfying the <br/>
<a id="pl.9.36"></a><var>9.36</var>requirements of this section shall use this course title after the effective date of this section.<br/>
<a id="pl.10.1"></a><var>10.1</var>(g) Providers of annuity training shall comply with the course completion reporting <br/>
<a id="pl.10.2"></a><var>10.2</var>requirements of chapter 45.<br/>
<a id="pl.10.3"></a><var>10.3</var>(h) The satisfaction of the training requirements of another state that are substantially <br/>
<a id="pl.10.4"></a><var>10.4</var>similar to the provisions of this subdivision satisfies the training requirements of this <br/>
<a id="pl.10.5"></a><var>10.5</var>subdivision in this state, but does not satisfy any of the continuing education requirements <br/>
<a id="pl.10.6"></a><var>10.6</var>of chapter 60K unless the training requirements of the other state are satisfied through one <br/>
<a id="pl.10.7"></a><var>10.7</var>or more continuing education courses approved by the commissioner.<br/>
<a id="pl.10.8"></a><var>10.8</var>(i) An insurer shall verify that an insurance producer has completed the annuity <br/>
<a id="pl.10.9"></a><var>10.9</var>training course required under this subdivision before allowing the producer to sell an <br/>
<a id="pl.10.10"></a><var>10.10</var>annuity product for that insurer. An insurer may satisfy its responsibility under this <br/>
<a id="pl.10.11"></a><var>10.11</var>subdivision by obtaining certificates of completion of the training course or obtaining <br/>
<a id="pl.10.12"></a><var>10.12</var>reports provided by commissioner-sponsored database systems or vendors or from <br/>
<a id="pl.10.13"></a><var>10.13</var>a reasonably reliable commercial database vendor that has a reporting arrangement <br/>
<a id="pl.10.14"></a><var>10.14</var>with approved insurance education providers. If such data collection and reporting <br/>
<a id="pl.10.15"></a><var>10.15</var>arrangements are not in place, an insurer must maintain records verifying that the producer <br/>
<a id="pl.10.16"></a><var>10.16</var>has completed the annuity training course required under this subdivision and make the <br/>
<a id="pl.10.17"></a><var>10.17</var>records available to the commissioner upon request.<br/>
<br/>
<a id="bill.0.8.0"></a><a id="pl.10.18"></a><var>10.18</var>    Sec. 8. <b>[72A.2034] PENALTIES.</b><br/>
<a id="pl.10.19"></a><var>10.19</var>    Subdivision 1. <b>Imposition.</b> (a) An insurer is responsible for compliance with <br/>
<a id="pl.10.20"></a><var>10.20</var>sections 72A.203 to 72A.2036. If a violation occurs, either because of the action or <br/>
<a id="pl.10.21"></a><var>10.21</var>inaction of the insurer or its insurance producer, the commissioner may, in addition to any <br/>
<a id="pl.10.22"></a><var>10.22</var>available penalties, remedies, or administrative actions order:<br/>
<a id="pl.10.23"></a><var>10.23</var>(1) an insurer to take reasonably appropriate corrective, including but not limited <br/>
<a id="pl.10.24"></a><var>10.24</var>to canceling a transaction action for any consumer harmed by the insurer's, or by its <br/>
<a id="pl.10.25"></a><var>10.25</var>insurance producer's, violation of sections 72A.203 to 72A.2036;<br/>
<a id="pl.10.26"></a><var>10.26</var>(2) a general agency, independent agency, or the insurance producer to take <br/>
<a id="pl.10.27"></a><var>10.27</var>reasonably appropriate corrective action for any consumer harmed by the insurance <br/>
<a id="pl.10.28"></a><var>10.28</var>producer's violation of sections 72A.203 to 72A.2036; and<br/>
<a id="pl.10.29"></a><var>10.29</var>(3) appropriate penalties and sanctions.<br/>
<a id="pl.10.30"></a><var>10.30</var>(b) Nothing in sections 72A.203 to 72A.2036 shall affect any obligation of an <br/>
<a id="pl.10.31"></a><var>10.31</var>insurer for the acts of its insurance producers, or any consumer remedy or any cause <br/>
<a id="pl.10.32"></a><var>10.32</var>of action that is otherwise provided for under applicable federal or state law, including <br/>
<a id="pl.10.33"></a><var>10.33</var>without limitation chapter 60K.<br/>
<a id="pl.11.1"></a><var>11.1</var>    Subd. 2. <b>Aggravation or mitigation.</b> Any applicable penalty for a violation of <br/>
<a id="pl.11.2"></a><var>11.2</var>sections 72A.203 to 72A.2036 may be increased or decreased upon consideration of any <br/>
<a id="pl.11.3"></a><var>11.3</var>aggravating or mitigating circumstances.<br/>
<br/>
<a id="bill.0.9.0"></a><a id="pl.11.4"></a><var>11.4</var>    Sec. 9. <b>[72A.2035] RECORD KEEPING.</b><br/>
<a id="pl.11.5"></a><var>11.5</var>    Subdivision 1. <b>Duration.</b> Insurers and insurance producers shall maintain or be able <br/>
<a id="pl.11.6"></a><var>11.6</var>to make available to the commissioner records of the information collected from the <br/>
<a id="pl.11.7"></a><var>11.7</var>consumer and other information used in making the recommendations that were the basis <br/>
<a id="pl.11.8"></a><var>11.8</var>for insurance transactions for ten years after the insurance transaction is completed by the <br/>
<a id="pl.11.9"></a><var>11.9</var>insurer. An insurer is permitted, but shall not be required, to maintain documentation on <br/>
<a id="pl.11.10"></a><var>11.10</var>behalf of an insurance producer.<br/>
<a id="pl.11.11"></a><var>11.11</var>    Subd. 2. <b>Medium.</b> Records required to be maintained by sections 72A.203 to <br/>
<a id="pl.11.12"></a><var>11.12</var>72A.2036 may be maintained in paper, photographic, microprocess, magnetic, mechanical, <br/>
<a id="pl.11.13"></a><var>11.13</var>or electronic media or by any process that accurately reproduces the actual document.<br/>
<br/>
<a id="bill.0.10.0"></a><a id="pl.11.14"></a><var>11.14</var>    Sec. 10. <b>[72A.2036] RELATIONSHIP TO OTHER LAWS; ENFORCEMENT.</b><br/>
<a id="pl.11.15"></a><var>11.15</var>(a) Nothing in sections 72A.203 to 72A.2036 shall be interpreted to:<br/>
<a id="pl.11.16"></a><var>11.16</var>(1) change, alter, or modify any of the obligations, duties, or responsibilities of <br/>
<a id="pl.11.17"></a><var>11.17</var>insurers or insurance producers, pursuant to any orders of the commissioner or consent <br/>
<a id="pl.11.18"></a><var>11.18</var>decrees in effect as of January 1, 2013; or<br/>
<a id="pl.11.19"></a><var>11.19</var>(2) limit the commissioner's authority to make any investigation or take any action <br/>
<a id="pl.11.20"></a><var>11.20</var>under chapter 45 or other applicable state law with respect to any insurer, insurance <br/>
<a id="pl.11.21"></a><var>11.21</var>producer, broker-dealer, third-party contractor, or other entity engaged in any activity <br/>
<a id="pl.11.22"></a><var>11.22</var>involving the sale of an annuity that is subject to sections 72A.203 to 72A.2036.<br/>
<a id="pl.11.23"></a><var>11.23</var>(b) In addition to any other penalties provided by the laws of this state, a violation of <br/>
<a id="pl.11.24"></a><var>11.24</var>sections 72A.203 to 72A.2036 shall be considered a violation of section 72A.20.<br/>
<br/>
<a id="bill.0.11.0"></a><a id="pl.11.25"></a><var>11.25</var>    Sec. 11. <b>EFFECTIVE DATE.</b><br/>
<a id="pl.11.26"></a><var>11.26</var>This act is effective January 1, 2013.<br/>