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Key: (1) language to be deleted (2) new language

CHAPTER 84--S.F.No. 4108

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 begin policy or contractdeleted text end new 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 end producerdeleted text begin ,deleted text end or the proposing insurer, whether or not deleted text begin there isdeleted text end an insurance producernew text begin is involvednew text end , that by reason of the transactiondeleted text begin ,deleted text end an existing new text begin annuity or other insurance new text end policy 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 begin Exceptiondeleted text end new 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 begin 1 or 3deleted text end new 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 end new 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 begin ordeleted text end

deleted text begin (2)deleted text end new text begin (3)new text end a consumer refuses to provide relevant deleted text begin suitabilitydeleted text end new text begin consumer profilenew text end information and the annuity transaction is not recommendeddeleted text begin .deleted text end new text begin ; ornew 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 begin Supervision systemdeleted text end new text begin Insurer 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 end new text begin (b)new text end An insurer shall establish new text begin and maintain new text end a 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 begin and maintain new text end standards for insurance producer product training and shallnew text begin , by July 1, 2023,new text end new 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 begin the new text end review of each recommendation before issuance of an annuity that are designed to ensure deleted text begin thatdeleted text end there is a reasonable basis to determine deleted text begin that a recommendation is suitabledeleted text end new text begin the recommended annuity effectively addresses the particular consumer's financial situation, insurance needs, and financial objectivesnew 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 begin suitabledeleted text end new text begin in compliance with subdivisions 1a to 1f, 4, 7, and 8new text end . This may include, but is not limited to, confirmation of deleted text begin consumer suitabilitydeleted text end new text begin the consumer's profilenew text end information, systematic customer surveys, new text begin insurance producer and consumer new text end interviews, confirmation letters, new text begin insurance producer attestations, new text end and 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 begin suitabilitydeleted text end new text begin consumer profilenew text end information new text begin or other required information under this subdivision new text end after issuance or delivery of the annuity; deleted text begin anddeleted 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 end the insurer shall annually provide a new text begin written new text end report 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 end new 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 end new 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 end new 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 end new 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 end new 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 insurernew text end .

Sec. 18.

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

Subd. 7.

deleted text begin Undue influencedeleted text end new 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 begin suitabilitydeleted text end new 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 begin suitabilitydeleted text end new text begin consumer profilenew 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 begin FINRAdeleted text end new text begin Comparable standards;new text end compliance.

(a) new text begin Recommendations and new text end sales of annuities made deleted text begin by broker-dealersdeleted text end new 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 end new 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 end new text begin (b)new text end For paragraph (a) to apply, an insurer shall:

(1) monitor the deleted text begin FINRA member broker-dealerdeleted text end new 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 lawnew text end using information collected in the normal course of the insurer's business; and

(2) provide to the deleted text begin FINRA member broker-dealerdeleted text end new 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 begin the FINRA member broker-dealerdeleted text end new 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 begin the responsibilities of the insurer to monitor the broker-dealer as provided in this subdivision; anddeleted text end new 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 begin the 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 end new 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; ornew 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 begin subdivisiondeleted text end new 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 begin June 1, 2013deleted text end new text begin December 31, 2022new 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 begin 2014deleted text end new text begin 2023new text end . Individuals who obtain a life insurance line of authority on or after January 1, deleted text begin 2014deleted text end new 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 begin and lawfuldeleted text end new 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 consumerdeleted 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 begin Annuity Suitability and Disclosuredeleted text end new text begin Best Interest Standards of Conduct for Annuity Salesnew text end ." Only courses satisfying the requirements of this section shall use this course title after deleted text begin Junedeleted text end new text begin July new text end 1, deleted text begin 2013deleted text end new 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 commissionerdeleted 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 end An 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 begin actiondeleted text end new text begin ,new text end for any consumer harmed by new text begin a failure to comply with sections 72A.203 to 72A.2036 by new text end the deleted text begin insurer'sdeleted text end new text begin insurernew text end , new text begin an entity contracted to perform the insurer supervisory duties, new text end or by deleted text begin itsdeleted text end new text begin the insurer'snew text end insurance deleted text begin producer's, violation of sections 72A.203 to 72A.2036deleted text end new 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 commissionernew 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 begin shall be interpreted to:deleted text end new 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 begin REPEALER. 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 begin EFFECTIVE 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

Presented to the governor May 21, 2022

Signed by the governor May 22, 2022, 3:45 p.m.

Official Publication of the State of Minnesota
Revisor of Statutes