N.M. Admin. Code § 13.9.20.7

Current through Register Vol. 35, No. 21, November 5, 2024

Section 13.9.20.7 - DEFINITIONS

For the purposes of this rule:

A."Annuity" means an annuity that is an insurance product under state law that is individually solicited, whether the product is classified as an individual or group annuity.

B."Cash compensation" means any discount, concession, fee, service fee, commission, sales charge, loan, override or cash benefit received by an insurance producer in connection with the recommendation or sale of an annuity from an insurer, intermediary or directly from the consumer.

C."Comparable standards" means:

(1) for broker-dealers and registered representatives of broker-dealers, applicable SEC and FINRA rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including, but not limited to, the most current version of Regulation Best Interest as promulgated by the SEC and codified at 84 F.R. 33318, and any amendments or successor rules thereto;

(2) for investment advisers registered under federal or state securities laws or investment adviser representatives, the fiduciary duties and all other requirements imposed on such investment advisers or investment adviser representatives by contract or under the Investment Advisers Act of 1940 or the New Mexico Uniform Securities Act, Section C of Chapter 58, Article 13 NMSA 1978, including but not limited to, SEC Form ADV and interpretations; and

(3) for plan fiduciaries or fiduciaries, the duties, obligations, prohibitions and all other requirements attendant to such status under ERISA or the IRC and any amendments or successor statutes thereto.

D."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:

(1) age;

(2) annual income;

(3) financial situation and needs, including debts and other obligations;

(4) financial experience;

(5) insurance needs;

(6) financial objectives;

(7) intended use of the annuity;

(8) financial time horizon;

(9) existing assets or financial products, including investment, annuity and insurance holdings;

(10) liquidity needs;

(11) liquid net worth;

(12) risk tolerance, including but not limited to, willingness to accept non-guaranteed elements in the annuity;

(13) financial resources used to fund the annuity; and

(14) tax status.

E."Continuing education credit" or "CE credit" means one continuing education credit hour as defined in 13.4.7.7 NMAC.

F."Continuing education provider" or "CE provider" means an individual or entity that is approved to offer continuing education courses pursuant to Section 59A-12-26 NMSA 1978 and 13.4.7 NMAC.

G."ERISA" means the federal Employee Retirement and Income Security Act.

H."Financial professional" means an insurance producer who is regulated and acting as:

(1) a broker-dealer registered under federal or state securities laws or a registered representative of a broker-dealer;

(2) an investment adviser registered under federal or state securities laws or a representative of an investment adviser working with a registered adviser; or

(3) a plan fiduciary, as defined in ERISA or IRC.

I."FINRA" means the financial industry regulatory authority or a succeeding agency.

J."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.

K."IRC" means the Internal Revenue Code.

L."Material conflict of interest" means a financial interest of an insurance producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation. It does not include cash compensation or non-cash compensation.

M."Non-cash 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.

N."Non-guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, dividends, non-interest-based credits, charges or elements of formulas used to determine any of these that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

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

P."Replacement" means a transaction in which a new annuity is to be purchased and it is known or should be known to the proposing insurance producer, or to the proposing insurers whether or not an insurance producer is involved, that because of the transaction, an existing annuity or other insurance policy 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 which benefits would be paid;

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

(5) used in a financed purchase.

Q."SEC" means the United States securities and exchange commission.

N.M. Admin. Code § 13.9.20.7

Adopted by New Mexico Register, Volume XXXIII, Issue 05, March 8, 2022, eff. 10/1/2022