Skip to main content Skip to office menu Skip to footer
Capital IconMinnesota Legislature

SF 4108

2nd Engrossment - 92nd Legislature (2021 - 2022) Posted on 10/06/2022 11:54am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 2nd Engrossment

Line numbers 1.1 1.2 1.3 1.4 1.5 1.6 1.7
1.8 1.9 1.10 1.11 1.12 1.13
1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16
2.17 2.18 2.19 2.20 2.21
2.22 2.23 2.24 2.25 2.26
3.1 3.2 3.3 3.4 3.5 3.6 3.7
3.8 3.9 3.10 3.11 3.12
3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20
3.21 3.22 3.23 3.24 3.25 3.26 3.27 3.28
3.29 3.30 3.31 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11
4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20
4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23 5.24 5.25 5.26 5.27 5.28 5.29 5.30 5.31 5.32 5.33 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18
6.19 6.20 6.21 6.22 6.23 6.24 6.25 6.26 6.27 6.28 6.29 6.30 6.31 6.32 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 7.17 7.18 7.19 7.20 7.21 7.22 7.23 7.24 7.25 7.26 7.27 7.28 7.29 7.30 7.31
8.1 8.2 8.3 8.4 8.5
8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 8.18
8.19 8.20 8.21 8.22 8.23 8.24 8.25 8.26 8.27
8.28 8.29 8.30 8.31 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10
9.11 9.12 9.13 9.14 9.15 9.16 9.17 9.18 9.19 9.20 9.21 9.22 9.23 9.24 9.25 9.26 9.27 9.28 9.29 9.30 9.31 9.32 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17 11.18
11.19 11.20 11.21 11.22 11.23 11.24 11.25 11.26
11.27 11.28 11.29 11.30 11.31 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 12.14 12.15 12.16 12.17 12.18 12.19 12.20 12.21 12.22 12.23 12.24 12.25 12.26 12.27 12.28 12.29 12.30 12.31 12.32 13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 13.9 13.10 13.11 13.12 13.13 13.14 13.15 13.16 13.17
13.18 13.19 13.20 13.21 13.22 13.23 13.24 13.25 13.26 13.27 13.28 13.29 13.30 13.31 13.32 13.33 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 14.10 14.11 14.12 14.13 14.14 14.15 14.16 14.17 14.18 14.19 14.20 14.21 14.22 14.23 14.24 14.25 14.26 14.27 14.28 14.29 14.30 15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8 15.9 15.10 15.11 15.12 15.13 15.14 15.15 15.16 15.17 15.18 15.19 15.20 15.21 15.22 15.23 15.24 15.25 15.26
15.27 15.28 15.29 15.30 15.31 15.32 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9 16.10 16.11 16.12 16.13 16.14 16.15 16.16 16.17 16.18 16.19
16.20 16.21 16.22 16.23 16.24 16.25 16.26 16.27
16.28 16.29 16.30 16.31 16.32 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11
17.12 17.13 17.14
17.15 17.16 17.17

A bill for an act
relating to commerce; modifying regulation of annuity suitability; amending
Minnesota Statutes 2020, sections 72A.2031, subdivisions 8, 10, by adding
subdivisions; 72A.2032, subdivisions 4, 6, 7, 8, by adding subdivisions; 72A.2033;
72A.2034; 72A.2035, subdivision 1; 72A.2036; repealing Minnesota Statutes
2020, sections 72A.2031, subdivisions 3, 9, 11; 72A.2032, subdivisions 1, 2, 3, 5.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 3a. new text end

new text begin Cash compensation. new text end

new text begin "Cash compensation" means any discount, concession
fee, service fee, commission, sales charge, loan, override, or cash benefit received by an
insurance producer from an insurer, intermediary, or consumer in connection with
recommending or selling an annuity.
new text end

Sec. 2.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 3b. new text end

new text begin Consumer profile information. new text end

new text begin "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:
new text end

new text begin (1) age;
new text end

new text begin (2) annual income and anticipated material changes in annual income;
new text end

new text begin (3) financial situation and needs, including debts and other obligations, and anticipated
material changes in financial situation and needs;
new text end

new text begin (4) financial experience;
new text end

new text begin (5) insurance needs;
new text end

new text begin (6) financial objectives;
new text end

new text begin (7) intended use of the annuity;
new text end

new text begin (8) financial time horizon;
new text end

new text begin (9) existing assets or financial products, including investment, annuity, and insurance
holdings, and anticipated material changes in existing assets;
new text end

new text begin (10) liquidity needs and anticipated material changes in liquidity needs;
new text end

new text begin (11) liquid net worth and anticipated material changes in liquid net worth;
new text end

new text begin (12) risk tolerance, including but not limited to willingness to accept nonguaranteed
elements in the annuity;
new text end

new text begin (13) financial resources used to fund the annuity;
new text end

new text begin (14) tax status; and
new text end

new text begin (15) whether or not the consumer has a reverse mortgage.
new text end

Sec. 3.

Minnesota Statutes 2020, section 72A.2031, subdivision 8, is amended to read:


Subd. 8.

Insurance producer.

"Insurance producer" means a person required to be
licensed under the laws of this state to sell, solicit, or negotiate insurance, including annuities.new text begin
For purposes of sections 72A.203 to 72A.2036, insurance producer includes an insurer
where no insurance producer is involved.
new text end

Sec. 4.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 8a. new text end

new text begin Intermediary. new text end

new text begin "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 insurance producers.
new text end

Sec. 5.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 8b. new text end

new text begin Material conflict of interest. new text end

new text begin "Material conflict of interest" means a financial
interest of the insurance producer in the sale of an annuity that a reasonable person would
expect to influence the impartiality of a recommendation. The payment of compensation,
including both cash and noncash compensation, does not in and of itself constitute a material
conflict of interest.
new text end

Sec. 6.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 8c. new text end

new text begin Noncash compensation. new text end

new text begin "Noncash compensation" means any form of
compensation that is not cash compensation, including but not limited to health insurance,
office rent, office support, and retirement benefits.
new text end

Sec. 7.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 8d. new text end

new text begin Nonguaranteed elements. new text end

new text begin "Nonguaranteed elements" means the premiums
and credited interest rates, including any bonus, benefits, values, dividends, noninterest-based
credits, charges, or elements of formulas used to determine any of the elements in this
subdivision, that are subject to company discretion and are not guaranteed at issue. An
element is considered nonguaranteed if any of the underlying nonguaranteed elements are
used in the element's calculation.
new text end

Sec. 8.

Minnesota Statutes 2020, section 72A.2031, is amended by adding a subdivision
to read:


new text begin Subd. 8e. new text end

new text begin Recommendation. new text end

new text begin "Recommendation" means advice provided by an insurance
producer to an individual consumer that was intended to result or does result in a purchase,
exchange, or replacement of an annuity in accordance with the advice rendered.
Recommendation does not include a general communication to the public, generalized
customer services, assistance or administrative support, general educational information
and tools, prospectuses, or other product and sales material.
new text end

Sec. 9.

Minnesota Statutes 2020, section 72A.2031, subdivision 10, is amended to read:


Subd. 10.

Replacement.

"Replacement" means a transaction in which a new deleted text beginpolicy or
contract
deleted text endnew text begin annuitynew text end is to be purchaseddeleted text begin,deleted text end and it is known or should be known to the proposing
new text begin insurance new text endproducerdeleted text begin,deleted text end or the proposing insurer, whether or not deleted text beginthere isdeleted text end an insurance producernew text begin
is involved
new text end, that by reason of the transactiondeleted text begin,deleted text end an existing new text beginannuity or other insurance new text endpolicy
deleted text begin or contractdeleted text end has been or is to be any of the following:

(1) lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing
insurer, or otherwise terminated;

(2) 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;

(3) 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;

(4) reissued with any reduction in cash value; or

(5) used in a financed purchase.

Sec. 10.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1a. new text end

new text begin Best interest obligations. new text end

new text begin An insurance producer, when recommending an
annuity, shall act in the best interest of the consumer under the circumstances known at the
time the recommendation is made. An insurance producer shall not place the insurance
producer's or the insurer's financial interest ahead of the consumer's interest. An insurance
producer has acted in the best interest of the consumer if the insurance producer has satisfied
obligations regarding care, disclosure, conflict of interest, and documentation specified in
subdivisions 1b, 1c, 1d, and 1e.
new text end

Sec. 11.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1b. new text end

new text begin Care obligation. new text end

new text begin (a) The insurance producer, in making a recommendation,
shall exercise reasonable diligence, care, and skill to:
new text end

new text begin (1) know the consumer's financial situation, insurance needs, and financial objectives;
new text end

new text begin (2) understand the available recommendation options after making a reasonable inquiry
into the options available to the insurance producer;
new text end

new text begin (3) 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
new text end

new text begin (4) communicate the basis or rationale supporting the recommendation.
new text end

new text begin (b) The requirements under paragraph (a) include making reasonable efforts to obtain
consumer profile information from the consumer prior to recommending an annuity.
new text end

new text begin (c) The requirements under paragraph (a) require an insurance producer to consider the
types of products the insurance producer is authorized and licensed to recommend or sell
that address the consumer's financial situation, insurance needs, and financial objectives.
This paragraph does not require analysis or consideration of any products outside the
insurance producer's authority and license, or other possible alternative products or strategies
available in the market at the time of the recommendation. Insurance producers shall be
held to standards applicable to insurance producers with similar authority and licensure.
new text end

new text begin (d) The requirements under this subdivision do not create a fiduciary obligation or
relationship and only create a statutory obligation under sections 72A.203 to 72A.2036.
new text end

new text begin (e) The consumer profile information; characteristics of the insurer; and product costs,
rates, benefits, and features are the factors generally relevant in determining whether an
annuity effectively addresses the consumer's financial situation, insurance needs, and financial
objectives. The level of importance of each factor under paragraph (a) may vary depending
on the facts and circumstances of a particular case. Each factor must not be considered in
isolation.
new text end

new text begin (f) The requirements under paragraph (a) include having a reasonable basis to believe
the consumer benefits from certain features of the annuity, including but not limited to
annuitization, death or living benefit, or other insurance-related features.
new text end

new text begin (g) The requirements under paragraph (a) apply to the particular annuity as a whole and
the underlying subaccounts to which funds are allocated at the time of the purchase or
exchange of an annuity, riders, and similar product enhancements, if any.
new text end

new text begin (h) The requirements under paragraph (a) do not require that the annuity with the lowest
onetime or multiple-occurrence compensation structure must be recommended.
new text end

new text begin (i) The requirements under paragraph (a) do not require the insurance producer to assume
ongoing monitoring obligations. An ongoing monitoring obligation may be separately owed
under the terms of a fiduciary, consulting, investment advising, or financial planning
agreement between the consumer and the insurance producer.
new text end

new text begin (j) In the case of an exchange or replacement of an annuity, the insurance producer shall
consider the whole transaction, which includes considering whether:
new text end

new text begin (1) the consumer incurs a surrender charge; is subject to the commencement of a new
surrender period; loses existing benefits such as death, living, or other contractual benefits;
or is subject to increased fees, investment advisory fees, or charges for riders and similar
product enhancements;
new text end

new text begin (2) the replacing product substantially benefits the consumer in comparison to the replaced
product over the life of the product; and
new text end

new text begin (3) the consumer had another annuity exchange or replacement and, in particular, an
exchange or replacement within the preceding 60 months.
new text end

new text begin (k) In the case of a person 65 years of age or older, neither an insurance producer nor
an insurer shall recommend replacing or exchanging an annuity that requires the insured to
pay a surrender charge for the annuity being replaced or exchanged if the replacement or
exchange does not confer a substantial financial benefit over the life of the annuity to the
consumer, so that a reasonable person would believe the purchase is unnecessary.
new text end

new text begin (l) Nothing in sections 72A.203 to 72A.2036 requires an insurance producer to obtain
any license other than an insurance producer license with the appropriate line of authority
to sell, solicit, or negotiate insurance in Minnesota, including but not limited to any securities
license in order to fulfill the duties and obligations contained in sections 72A.203 to
72A.2036, provided that the insurance producer does not give advice or provide services
that are subject to other securities law or engage in any other activity requiring other
professional licenses.
new text end

Sec. 12.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1c. new text end

new text begin Disclosure obligation. new text end

new text begin (a) Prior to recommending and selling an annuity, the
insurance producer shall prominently disclose to the consumer the information required
under this paragraph on a form prescribed by the commissioner. The form prescribed by
the commissioner must contain:
new text end

new text begin (1) a description of (i) the scope and terms of the relationship with the consumer, and
(ii) the role of the insurance producer in the transaction;
new text end

new text begin (2) an affirmative statement on whether the insurance producer is licensed and authorized
to sell the following products:
new text end

new text begin (i) fixed annuities;
new text end

new text begin (ii) fixed indexed annuities;
new text end

new text begin (iii) variable annuities;
new text end

new text begin (iv) life insurance;
new text end

new text begin (v) mutual funds;
new text end

new text begin (vi) stocks and bonds; and
new text end

new text begin (vii) certificates of deposit;
new text end

new text begin (3) an affirmative statement describing the insurers that the insurance producer is
authorized, contracted, appointed, or otherwise able to sell insurance products for, using
the following descriptions:
new text end

new text begin (i) from one insurer;
new text end

new text begin (ii) from two or more insurers; or
new text end

new text begin (iii) from two or more insurers, although primarily contracted with one insurer;
new text end

new text begin (4) a description of the sources and types of cash and noncash compensation received
by the insurance producer, including whether the insurance producer is (i) compensated for
the sale of a recommended annuity by commission as part of a premium, or (ii) receives
other remuneration from the insurer, intermediary, or other insurance producer or by fee as
a result of a contract for advice or consulting service; and
new text end

new text begin (5) a notice of the consumer's right to request additional information regarding cash
compensation.
new text end

new text begin (b) Upon request of the consumer or the consumer's designated representative, the
insurance producer shall disclose:
new text end

new text begin (1) a reasonable estimate of the amount of cash compensation to be received by the
insurance producer, which may be stated as a range of amounts or percentages; and
new text end

new text begin (2) whether the cash compensation is a onetime 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.
new text end

new text begin (c) Prior to or at the time an annuity is recommended or sold, the insurance producer
shall have a reasonable basis to believe the consumer has been reasonably informed of
various features of the annuity, including the potential surrender period and surrender charge;
potential tax penalty if the consumer sells, exchanges, surrenders, redeems, or annuitizes
the annuity; mortality and expense fees; investment advisory fees; annual fees; potential
charges for and features of riders or other options of the annuity; limitations on interest
returns; potential changes in nonguaranteed elements of the annuity; insurance and investment
components; and market risk.
new text end

Sec. 13.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1d. new text end

new text begin Conflict of interest obligation. new text end

new text begin An insurance producer shall identify and
avoid or reasonably manage and disclose material conflicts of interest, including a material
conflict of interest related to an ownership interest.
new text end

Sec. 14.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1e. new text end

new text begin Documentation obligation. new text end

new text begin An insurance producer shall, at the time of
recommendation or sale:
new text end

new text begin (1) make a written record of any recommendation and the basis for the recommendation,
subject to sections 72A.203 to 72A.2036;
new text end

new text begin (2) obtain a signed statement, on a form prescribed by the commissioner, that includes:
new text end

new text begin (i) a customer's refusal to provide the consumer profile information, if any; and
new text end

new text begin (ii) a customer's understanding of the ramifications of not providing the customer's
consumer profile information or providing insufficient consumer profile information; and
new text end

new text begin (3) a consumer-signed statement, on a form prescribed by the commissioner, that
acknowledges the annuity transaction is not recommended if the customer decides to enter
into an annuity transaction that is not based on the insurance producer's recommendation.
new text end

Sec. 15.

Minnesota Statutes 2020, section 72A.2032, is amended by adding a subdivision
to read:


new text begin Subd. 1f. new text end

new text begin Application of best interest obligation. new text end

new text begin Any requirement applicable to an
insurance producer under this section applies to every insurance producer who exercises
control or influence in making a recommendation and has received direct compensation as
a result of the recommendation or sale, regardless of whether the insurance producer had
any direct contact with the consumer. Providing or delivering marketing or educational
materials, product wholesaling or other back office product support, and general supervision
of an insurance producer do not, in and of themselves, constitute material control or influence.
new text end

Sec. 16.

Minnesota Statutes 2020, section 72A.2032, subdivision 4, is amended to read:


Subd. 4.

deleted text beginExceptiondeleted text endnew text begin Transactions not based on recommendationnew text end.

(a) Except as provided
under paragraph (b), an insurance producerdeleted text begin,deleted text end or an insurerdeleted text begin,deleted text end does not have any obligation to
a consumer under subdivision deleted text begin1 or 3deleted text endnew text begin 1anew text end related to an annuity transaction if:

new text begin (1) no recommendation is made;
new text end

deleted text begin (1)deleted text endnew text begin (2)new text end a recommendation was made and was later found to have been prepared based
on materially inaccurate information provided by the consumer; deleted text beginor
deleted text end

deleted text begin (2)deleted text endnew text begin (3)new text end a consumer refuses to provide relevant deleted text beginsuitabilitydeleted text endnew text begin consumer profilenew text end information
and the annuity transaction is not recommendeddeleted text begin.deleted text endnew text begin; or
new text end

new text begin (4) a consumer decides to enter into an annuity transaction that is not based on a
recommendation of the insurance producer.
new text end

(b) An insurer's issuance of an annuity subject to paragraph (a) shall be reasonable under
all the circumstances actually knowndeleted text begin, or which after reasonable inquiry should be knowndeleted text end
to the insurer or the insurance producerdeleted text begin,deleted text end at the time the annuity is issued.

Sec. 17.

Minnesota Statutes 2020, section 72A.2032, subdivision 6, is amended to read:


Subd. 6.

deleted text beginSupervision systemdeleted text end new text beginInsurer dutiesnew text end.

new text begin (a) Except as permitted under subdivision
4, an insurer shall not issue an annuity recommended to a consumer unless there is a
reasonable basis to believe the annuity effectively addresses the particular consumer's
financial situation, insurance needs, and financial objectives based on the consumer's
consumer profile information.
new text end

deleted text begin (a)deleted text endnew text begin (b)new text end An insurer shall establish new text beginand maintain new text enda supervision system that is reasonably
designed to achieve the insurer's and its insurance producers' compliance with sections
72A.203 to 72A.2036, including, but not limited to, all of the following:

(1) the insurer shallnew text begin establish andnew text end maintain reasonable procedures to inform its insurance
producers of the requirements of sections 72A.203 to 72A.2036 and shall incorporate the
requirements of sections 72A.203 to 72A.2036 into relevant insurance producer training
programs and manuals;

(2) the insurer shall establish new text beginand maintain new text endstandards for insurance producer product
training and shallnew text begin, by July 1, 2023,new text endnew text begin establish andnew text end maintain reasonable procedures to require
its insurance producers to comply with the requirements of section 72A.2033;

(3) the insurer shall provide product-specific training and training materials which explain
all material features of its annuity products to its insurance producers;

(4) the insurer shallnew text begin establish andnew text end maintain procedures for new text beginthe new text endreview of each
recommendation before issuance of an annuity that are designed to ensure deleted text beginthatdeleted text end there is a
reasonable basis to determine deleted text beginthat a recommendation is suitabledeleted text endnew text begin the recommended annuity
effectively addresses the particular consumer's financial situation, insurance needs, and
financial objectives
new text end. The review procedures shall apply a screening system for the purpose
of identifying selected transactions for additional review and may be accomplished
electronically or through other reasonable means including, but not limited to, physical
review. The electronic or other system shall be designed to require an elevated individual
review for those transactions involving consumers 65 years of age or older on the basis of
the review procedure's thresholds for liquidity, liquid net worth, income, and anticipated
material changes in their financial situation and needs and the elevated review shall be
conducted by a natural person or persons;

(5) the insurer shallnew text begin establish andnew text end maintain reasonable procedures to detect
recommendations that are not deleted text beginsuitabledeleted text endnew text begin in compliance with subdivisions 1a to 1f, 4, 7, and
8
new text end. This may include, but is not limited to, confirmation of deleted text beginconsumer suitabilitydeleted text endnew text begin the consumer's
profile
new text end information, systematic customer surveys, new text begininsurance producer and consumer
new text end interviews, confirmation letters, new text begininsurance producer attestations, new text endand programs of internal
monitoring. Nothing in this clause prevents an insurer from complying with this clause by
applying sampling procedures, or by confirming deleted text beginsuitabilitydeleted text endnew text begin consumer profilenew text end information
new text begin or other required information under this subdivision new text endafter issuance or delivery of the annuity;
deleted text begin and
deleted text end

new text begin (6) the insurer shall establish and maintain reasonable procedures to assess, prior to or
upon issuance or delivery of an annuity, whether an insurance producer has provided to the
consumer the information required under this subdivision;
new text end

new text begin (7) the insurer shall establish and maintain reasonable procedures to identify and address
suspicious consumer refusals to provide consumer profile information;
new text end

new text begin (8) 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. The requirements of this clause
do not prohibit the receipt of health insurance, office rent, office support, retirement benefits,
or other employee benefits, as long as the benefits are not based on the volume of sales of
a specific annuity within a limited period of time; and
new text end

deleted text begin (6)deleted text end new text begin(9) new text endthe insurer shall annually provide a new text beginwritten new text endreport to senior management, including
to the senior manager responsible for audit functions, which details a review, with appropriate
testing, reasonably designed to determine the effectiveness of the supervision system, the
exceptions found, and corrective action taken or recommended, if any.

deleted text begin (b)(1)deleted text endnew text begin (c)(1)new text end Nothing in this subdivision restricts an insurer from contracting for
performance of a function, including maintenance of procedures, required under paragraph
deleted text begin (a)deleted text endnew text begin (b)new text end. An insurer is responsible for taking appropriate corrective action and may be subject
to sanctions and penalties pursuant to section 72A.2034 regardless of whether the insurer
contracts for performance of a function and regardless of the insurer's compliance with
deleted text begin subdivision 2deleted text endnew text begin clause (2)new text end, and an insurer is responsible for the compliance of an insurance
producer with the provisions of sections 72A.203 to 72A.2036 regardless of whether the
insurer contracts for performance of a function required under this paragraph; and

(2) an insurer's supervision system under paragraph deleted text begin(a)deleted text endnew text begin (b)new text end must include supervision of
contractual performance under this clause. This includes, but is not limited to, the following:

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

(ii) 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.

deleted text begin (c)deleted text endnew text begin (d)new text end An insurer is not required to include in its system of supervision an insurance
producer's recommendations to consumers of products other than the annuities offered by
the insurernew text begin, or consideration of or comparison to options available to the insurance producer
or compensation relating to the options other than annuities or other products offered by
the insurer
new text end.

Sec. 18.

Minnesota Statutes 2020, section 72A.2032, subdivision 7, is amended to read:


Subd. 7.

deleted text beginUndue influencedeleted text endnew text begin Prohibited practicesnew text end.

An insurance producer or insurer shall
not dissuade, or attempt to dissuade, a consumer from:

(1) providing deleted text beginsuitabilitydeleted text endnew text begin consumer profilenew text end information to the insurance producer or
insurer and truthfully responding to an insurer's request for confirmation of deleted text beginsuitabilitydeleted text endnew text begin
consumer profile
new text end information;

(2) filing a complaint; or

(3) cooperating with the investigation of a complaint.

Sec. 19.

Minnesota Statutes 2020, section 72A.2032, subdivision 8, is amended to read:


Subd. 8.

deleted text beginFINRAdeleted text endnew text begin Comparable standards;new text end compliance.

(a) new text beginRecommendations and new text endsales
of annuities made deleted text beginby broker-dealersdeleted text endnew text begin in compliance with comparable standardsnew text end satisfy the
requirements under sections 72A.203 to 72A.2036deleted text begin, so long as:deleted text endnew text begin. This subdivision applies to
recommendations and sales of annuities made by financial professionals in compliance with
business rules, controls, and procedures that satisfy a comparable standard even if the
standard would not otherwise apply to the product or recommendation at issue. Nothing in
this subdivision limits the commissioner's ability to investigate and enforce sections 72A.203
to 72A.2036.
new text end

deleted text begin (1) those sales comply with FINRA requirements pertaining to suitability and supervision
of annuity transactions; and
deleted text end

deleted text begin (2) a registered principal reviews and approves the transaction based on review criteria
that include consideration of the customer's age, income, liquidity needs, and financial
situation.
deleted text end

deleted text begin (b) The insurer remains responsible for the suitability of every transaction and must take
reasonably appropriate corrective action for any consumer harmed by violation of law and
is subject to the penalty provisions described in section 72A.2034, subdivision 1.
deleted text end

deleted text begin (c)deleted text endnew text begin (b)new text end For paragraph (a) to apply, an insurer shall:

(1) monitor the deleted text beginFINRA member broker-dealerdeleted text endnew text begin relevant conduct of the financial
professional seeking to rely on paragraph (a) or the entity responsible for supervising the
financial professional, including the financial professional's broker-dealer or an investment
adviser registered under federal or state securities law
new text end using information collected in the
normal course of the insurer's business; and

(2) provide to the deleted text beginFINRA member broker-dealerdeleted text endnew text begin entity responsible for supervising the
financial professional seeking to rely on paragraph (a), including the financial professional's
broker-dealer or investment adviser registered under federal or state securities law,
new text end
information and reports that are reasonably appropriate to assist deleted text beginthe FINRA member
broker-dealer
deleted text endnew text begin the entitynew text end to maintain its supervision system.

deleted text begin (d) Nothing in this subdivision limits: deleted text end new text begin (c) For purposes of this subdivision, "financial
professional" means an insurance producer that is regulated and acting as:
new text end

(1) deleted text beginthe responsibilities of the insurer to monitor the broker-dealer as provided in this
subdivision; and
deleted text endnew text begin a broker-dealer registered under federal or state securities law or a registered
representative of a broker-dealer;
new text end

(2) deleted text beginthe commissioner of commerce's ability to enforce the provisions of sections 72A.203
to 72A.2036 with respect to sales made in compliance with FINRA requirements and federal
law.
deleted text endnew text begin an investment adviser registered under federal or state securities law, or an investment
adviser representative associated with the federal or state registered investment adviser; or
new text end

new text begin (3) a plan fiduciary under the Employee Retirement Income Security Act of 1974
(ERISA), United States Code, title 29, section 1001; Code of Federal Regulations, title 29,
part 2510.3-21; fiduciary under the Internal Revenue Code, section 4975(e)(3); or any
amendments or successor statutes.
new text end

new text begin (d) For purposes of this subdivision, "comparable standards" means:
new text end

new text begin (1) 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;
new text end

new text begin (2) with respect to investment advisers registered under federal or state securities law
or investment adviser representatives, the fiduciary duties and all other requirements imposed
on the 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 Form ADV and interpretations; and
new text end

new text begin (3) with respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions,
and all other requirements attendant to status under ERISA or the Internal Revenue Code
and any amendments or successor statutes.
new text end

Sec. 20.

Minnesota Statutes 2020, section 72A.2033, is amended to read:


72A.2033 INSURANCE PRODUCER TRAINING.

Subdivision 1.

Requirement.

An insurance producer shall not solicit the sale of an
annuity product unless the insurance producer has adequate knowledge of the product to
recommend the annuity and the insurance producer is in compliance with the insurer's
standards for product training. An insurance producer may rely on insurer-provided
product-specific training standards and materials to comply with this deleted text beginsubdivisiondeleted text endnew text begin sectionnew text end.

Subd. 2.

Initial training.

(a) An insurance producer who is otherwise entitled to engage
in the sale of annuity products shall complete a onetime four-credit training course approved
by the commissioner and provided by a continuing education provider approved by the
commissioner prior to commencing the transaction of annuities.

Insurance producers who hold a life insurance line of authority on deleted text beginJune 1, 2013deleted text endnew text begin December
31, 2022
new text end, and who desire to sell annuities shall complete the requirements of this subdivision
no later than six months after January 1, deleted text begin2014deleted text endnew text begin 2023new text end. Individuals who obtain a life insurance
line of authority on or after January 1, deleted text begin2014deleted text endnew text begin 2023new text end, may not engage in the sale of annuities
until the annuity training course required under this subdivision has been completed.

(b) The length of the training required under this subdivision must be four continuing
education hours.

(c) The training required under this subdivision must include information on the following
topics:

(1) the types of annuities and various classifications of annuities;

(2) identification of the parties to an annuity;

(3) how fixed, variable, and indexed annuity contract provisions affect consumers;

(4) the application of income taxation of qualified and nonqualified annuities;

(5) the primary uses of annuities;

(6) appropriate deleted text beginand lawfuldeleted text endnew text begin standard of conduct,new text end sales practices, replacement, and
disclosure requirementsdeleted text begin, and suitability information and whether an annuity is suitable for
a consumer
deleted text end; and

(7) the recognition of indicators that a prospective insured may lack the short-term
memory or judgment to knowingly purchase an insurance product.

(d) Providers of courses intended to comply with this subdivision shall cover all topics
listed in the prescribed outline and shall not present any marketing information or provide
training on sales techniques or provide specific information about a particular insurer's
products.

(e) A provider of an annuity training course intended to comply with this subdivision
must be an approved continuing education provider in this state and comply with the
requirements applicable to insurance producer continuing education courses.

new text begin (f) An insurance producer licensed by December 31, 2022, who holds a life insurance
line of authority and has previously completed the training in subdivision 2, paragraph (a),
shall complete either:
new text end

new text begin (1) a new four-credit training course approved by the Department of Commerce after
July 1, 2022; or
new text end

new text begin (2) an additional onetime one-credit training course approved by the Department of
Commerce after July 1, 2022, and provided by a Department of Commerce-approved
education provider on appropriate sales practices and replacement and disclosure
requirements under sections 72A.203 to 72A.2036.
new text end

deleted text begin (f)deleted text end Annuity training courses may be conducted and completed by classroom or self-study
methods in accordance with chapter 45. In order to assist compliance with this section, all
courses approved by the commissioner for the purposes of this section shall be given the
course title "deleted text beginAnnuity Suitability and Disclosuredeleted text endnew text begin Best Interest Standards of Conduct for
Annuity Sales
new text end." Only courses satisfying the requirements of this section shall use this course
title after deleted text beginJunedeleted text end new text beginJuly new text end1, deleted text begin2013deleted text endnew text begin 2022new text end.

(g) Providers of annuity training shall comply with the course completion reporting
requirements of chapter 45.

(h) The satisfaction of the training requirements of another state that are substantially
similar to the provisions of this subdivision satisfies the training requirements of this
subdivision in this statedeleted text begin, but does not satisfy any of the continuing education requirements
of chapter 60K unless the training requirements of the other state are satisfied through one
or more continuing education courses approved by the commissioner
deleted text end.

new text begin (i) The satisfaction of the components of the training requirements of any course or
courses with components substantially similar to the provisions of this subdivision satisfy
the training requirements of this subdivision.
new text end

deleted text begin (i)deleted text end new text begin(j) new text endAn insurer shall verify that an insurance producer has completed the annuity
training course required under this subdivision before allowing thenew text begin insurancenew text end producer to
sell an annuity product for that insurer. An insurer may satisfy its responsibility under this
subdivision by obtaining certificates of completion of the training course or obtaining reports
provided by commissioner-sponsored database systems, vendors, or from a reasonably
reliable commercial database vendor that has a reporting arrangement with approved
insurance education providers. If such data collection and reporting arrangements are not
in place, an insurer must maintain records verifying that the producer has completed the
annuity training course required under this subdivision and make the records available to
the commissioner upon request.

Sec. 21.

Minnesota Statutes 2020, section 72A.2034, is amended to read:


72A.2034 PENALTIES.

Subdivision 1.

Impositionnew text begin; mitigation; enforcementnew text end.

(a) An insurer is responsible for
compliance with sections 72A.203 to 72A.2036. If a violation occurs, either because of the
action or inaction of the insurer or its insurance producer, the commissioner may order, in
addition to any available penalties, remedies, or administrative actions:

(1) an insurer to take reasonably appropriate corrective action, including but not limited
to canceling a transaction deleted text beginactiondeleted text endnew text begin,new text end for any consumer harmed by new text begina failure to comply with
sections 72A.203 to 72A.2036 by
new text endthedeleted text begin insurer'sdeleted text endnew text begin insurernew text end, new text beginan entity contracted to perform the
insurer supervisory duties,
new text endor by deleted text beginitsdeleted text endnew text begin the insurer'snew text end insurance deleted text beginproducer's, violation of sections
72A.203 to 72A.2036
deleted text endnew text begin producernew text end;

(2) a general agency, independent agency, or the insurance producer to take reasonably
appropriate corrective action for any consumer harmed by the insurance producer's violation
of sections 72A.203 to 72A.2036; and

(3) appropriate penalties and sanctions.

(b) Nothing in sections 72A.203 to 72A.2036 shall affect any obligation of an insurer
for the acts of its insurance producers, or any consumer remedy or any cause of action that
is otherwise provided for under applicable federal or state law, including without limitation
chapter 60K.

Subd. 2.

Aggravation or mitigation.

Any applicable penalty for a violation of sections
72A.203 to 72A.2036 may be increased or decreased upon consideration of any aggravating
or mitigating circumstancesnew text begin, including if corrective action for the consumer was taken
promptly after a violation was discovered, or the violation was not part of a pattern or
practice. The authority to enforce compliance with sections 72A.203 to 72A.2036 is vested
exclusively with the commissioner
new text end.

Sec. 22.

Minnesota Statutes 2020, section 72A.2035, subdivision 1, is amended to read:


Subdivision 1.

Duration.

Insurers and insurance producers shall maintain or be able to
make available to the commissioner records of the information collected from the consumernew text begin,
disclosures made to the consumer, including summaries of oral disclosures,
new text end and other
information used in making the recommendations that were the basis for insurance
transactions for ten years after the insurance transaction is completed by the insurer. An
insurer is permitted, but shall not be required, to maintain documentation on behalf of an
insurance producer.

Sec. 23.

Minnesota Statutes 2020, section 72A.2036, is amended to read:


72A.2036 RELATIONSHIP TO OTHER LAWS; ENFORCEMENT.

(a) Nothing in sections 72A.203 to 72A.2036 deleted text beginshall be interpreted to:deleted text endnew text begin limits the
commissioner's authority to make any investigation or take any action under chapter 45 or
other applicable law with respect to any insurer, insurance producer, broker-dealer, third-party
contractor, or other entity engaged in any activity involving the sale of an annuity that is
subject to sections 72A.203 to 72A.2036.
new text end

deleted text begin (1) change, alter, or modify any of the obligations, duties, or responsibilities of insurers
or insurance producers, pursuant to any orders of the commissioner or consent decrees in
effect as of June 1, 2013; or
deleted text end

deleted text begin (2) limit the commissioner's authority to make any investigation or take any action under
chapter 45 or other applicable state law with respect to any insurer, insurance producer,
broker-dealer, third-party contractor, or other entity engaged in any activity involving the
sale of an annuity that is subject to sections 72A.203 to 72A.2036.
deleted text end

(b) In addition to any other penalties provided by the laws of this state, a violation of
sections 72A.203 to 72A.2036 shall be considered a violation of section 72A.20.

Sec. 24. new text beginREPEALER.
new text end

new text begin Minnesota Statutes 2020, sections 72A.2031, subdivisions 3, 9, and 11; and 72A.2032,
subdivisions 1, 2, 3, and 5,
new text end new text begin are repealed.
new text end

Sec. 25. new text beginEFFECTIVE DATE.
new text end

new text begin Sections 1 to 19 and 21 to 24 are effective January 1, 2023. Section 20 is effective the
day following final enactment.
new text end

APPENDIX

Repealed Minnesota Statutes: S4108-2

72A.2031 DEFINITIONS.

Subd. 3.

Broker-dealer.

"Broker-dealer" means a person engaged in the business of effecting transactions in securities for the account of others or for the person's own account. The term does not include:

(1) an agent;

(2) an issuer;

(3) a depository institution, provided such activities are conducted in accordance with rules as may be adopted by the administrator;

(4) an international banking institution; or

(5) a person excluded by rule adopted or order issued under this chapter.

Subd. 9.

Registered principal.

"Registered principal" means a person associated with a FINRA member broker-dealer, who is actively engaged in the management of the FINRA member broker-dealer investment banking or securities business, including supervision, solicitation, conduct of business, or the training of persons associated with a FINRA member broker-dealer for any of these functions.

Subd. 11.

Suitability information.

"Suitability information" means information that is reasonably appropriate to determine the suitability of a recommendation, including but not limited to the following:

(1) age;

(2) annual income and anticipated material changes in annual income;

(3) financial situation and needs, including the financial resources used for the funding of the annuity, and including anticipated material changes in financial situation and needs;

(4) financial experience;

(5) financial objectives;

(6) intended use of the annuity;

(7) financial time horizon;

(8) existing assets, including investment and life insurance holdings and anticipated material changes in existing assets;

(9) liquidity needs and anticipated material changes in liquidity needs;

(10) liquid net worth and anticipated material changes in liquid net worth;

(11) risk tolerance;

(12) tax status; and

(13) whether or not the consumer has a reverse mortgage.

72A.2032 DUTIES OF INSURERS AND INSURANCE PRODUCERS.

Subdivision 1.

Suitability standard.

In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing, after a reasonable inquiry, that the recommendation is suitable for the consumer, under the totality of the circumstances based on the facts disclosed by the consumer as to the consumer's investments and other insurance products and as to the consumer's financial situation and needs, including the consumer's suitability information, and that there is a reasonable basis to believe all of the following:

(1) the consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, redeems, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk;

(2) the consumer would receive a tangible net benefit from the transaction;

(3) for the particular consumer based on the consumer's suitability information:

(i) the particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable; and

(ii) in the case of an exchange or replacement, the transaction as a whole is suitable taking into account, among other things, the age of the consumer; and

(4) in the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration all of the following:

(i) the consumer will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;

(ii) the consumer would receive a tangible net benefit from the transaction, and in the case of a person 65 years of age or older, neither a producer nor an insurer shall recommend a replacement or exchange of an annuity that requires the insured to pay a surrender charge for the annuity being replaced or exchanged if the replacement or exchange does not confer a substantial financial benefit over the life of the annuity to the consumer so that a reasonable person would believe the purchase is unnecessary; and

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

Subd. 2.

Obtaining suitability information.

Before the execution of a purchase, exchange, or replacement of an annuity resulting from a recommendation, an insurance producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain the consumer's suitability information, and record this information on a form, inventory, or similar record. The producer, upon request, shall provide to the consumer or the consumer's legal representative a copy of the information used in the making of the suitability determination.

Subd. 3.

Restriction on issuance of annuity.

Except as permitted under subdivision 4, an insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer's suitability information.

Subd. 5.

Documentation.

An insurance producer or, where no insurance producer is involved, the responsible insurer representative shall at the time of sale:

(1) make a record of any recommendation subject to subdivision 1;

(2) obtain a consumer-signed statement documenting a consumer's refusal to provide suitability information, if any; and

(3) obtain a consumer-signed statement acknowledging that an annuity transaction is not recommended if a consumer decides to enter into an annuity transaction that is not based on the insurance producer's or insurer's recommendation.