NAC688A.460. Establishment and maintenance of system to supervise recommendations.

     1. An insurer shall provide for a system to supervise recommendations which is reasonably designed to comply with the provisions of this chapter and which is established and maintained pursuant to subsections 3, 4 and 5. The system must include, without limitation, a process for maintaining written procedures and a process for reviewing records which is reasonably designed to detect and prevent violations of the provisions of this chapter.

     2. A producer of insurance shall provide for a system to supervise recommendations which is reasonably designed to comply with the provisions of this chapter and which is established and maintained pursuant to subsections 3, 4 and 5. The system must include, without limitation, a process for maintaining written procedures and a process for reviewing records which is reasonably designed to detect and prevent violations of the provisions of this chapter.

     3. An insurer may contract with a third party, including, without limitation, a producer of insurance, to establish and maintain a system to supervise recommendations pursuant to the provisions of subsection 1 with respect to producers of insurance under contract with or employed by the third party.

     4. An insurer shall make a reasonable inquiry to ensure that a third party with whom the insurer contracts pursuant to subsection 3 complies with the provisions of subsection 1 and shall take reasonable action to enforce the contractual obligation to comply with the provisions of subsection 1. An insurer may comply with its obligation to make a reasonable inquiry by:

     (a) Obtaining a certification that the third party is complying with the provisions of subsection 1 from a senior manager of the third party who has responsibility for complying with the provisions of subsection 1; and

     (b) Periodically reviewing the performance of the third party to determine whether the third party is complying with the provisions of subsection 1. The insurer shall use reasonable procedures in conducting the review.

     5. The provisions of subsections 1 and 2 do not require an insurer or a producer of insurance to:

     (a) Review, or provide for the review of, all solicited transactions of a producer of insurance; or

     (b) Include in its system to supervise recommendations advice given to consumers by a producer of insurance concerning products other than the annuities offered by the insurer or producer of insurance.

     6. A producer of insurance contracting with an insurer pursuant to subsection 3, when requested by an insurer pursuant to subsection 4, shall provide to the insurer a certification as described in subsection 4 or a clear statement that the producer of insurance is unable to meet the criteria for certification within 10 days after the producer of insurance receives the request from the insurer.

     7. A person may not provide a certification pursuant to paragraph (a) of subsection 4 unless:

     (a) The person is a senior manager with responsibility for complying with the provisions of subsection 1; and

     (b) The person has a reasonable basis for making the certification.

     8. Compliance with Conduct Rule 2310 of the National Association of Securities Dealers pertaining to suitability satisfies the requirements of this section for the recommendation of variable annuities.

     9. An insurer that contracts with a third party pursuant to subsection 3 and that complies with the requirements set forth in subsection 4 shall be deemed to have complied with the provisions of subsection 1.

     (Added to NAC by Comm’r of Insurance by R115-06, eff. 9-18-2006)

Notation

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed with the Secretary of State on September 18, 2006 (LCB File No. R115-06), the source of this section, contains the following provision not included in NAC:

      “An insurer or provider of insurance is not required to comply with the provisions of this regulation until December 17, 2006.”