[§431:10D-623]  Duties of insurers andinsurance producers.  (a)  In recommending to a consumer the purchase of anannuity or the exchange of an annuity that results in another insurancetransaction or series of insurance transactions, the insurance producer, or theinsurer where no producer is involved, shall have reasonable grounds forbelieving that the recommendation is suitable for the consumer on the basis ofthe facts disclosed by the consumer about the consumer's investments, otherinsurance products, financial situation, and needs.

(b)  Prior to the execution of a purchase orexchange of an annuity resulting from a recommendation, an insurance producer,or an insurer where no producer is involved, shall make reasonable efforts toobtain information concerning:

(1)  The consumer's financial status;

(2)  The consumer's tax status;

(3)  The consumer's investment objectives; and

(4)  Such other information used or considered to bereasonable by the insurance producer, or the insurer where no producer isinvolved, in making recommendations to the consumer.

  (c)(1)  Except as provided under paragraph (2), neitheran insurance producer, nor an insurer where no producer is involved, shall haveany obligation to a consumer related to any recommendation if a consumer:

(A)  Refuses to provide relevant informationrequested by the insurer or insurance producer;

(B)  Decides to enter into an insurancetransaction that is not based on a recommendation of the insurer or insuranceproducer; or

(C)  Fails to provide complete or accurateinformation.

(2)  An insurer or insurance producer's recommendationsubject to paragraph (1) shall be reasonable under all the circumstancesactually known to the insurer or insurance producer at the time of therecommendation.

(d)  An insurer shall either ensure that asystem to supervise recommendations that is reasonably designed to achievecompliance with this part is established and maintained by complying withsubsections (f), (g), and (h), or establish and maintain such a system, whichshall include but not be limited to:

(1)  Maintaining written procedures; and

(2)  Conducting a periodic review of the insurer'srecords that is reasonably designed to assist in detecting and preventingviolations of this part.

(e)  A managing general agent and independentagency shall adopt a system established by an insurer to superviserecommendations of its insurance producers that is reasonably designed toachieve compliance with this part, or establish and maintain such a system,which shall include but not be limited to:

(1)  Maintaining written procedures; and

(2)  Conducting a periodic review of records that isreasonably designed to assist in detecting and preventing violations of thispart.

(f)  An insurer may contract with a third party,including a managing general agent or independent agency, to comply with therequirement of subsection (d) to establish and maintain a system of supervisionof insurance producers under contract with or employed by the third party.

(g)  An insurer shall make reasonable inquiryto ensure that the third party contracting under subsection (f) is performingthe functions required under subsection (d) and shall take such action as isreasonable under the circumstances to enforce the contractual obligation toperform the functions.  An insurer may comply with its obligation to makereasonable inquiry by:

(1)  Annually obtaining a certification from a thirdparty senior manager who has responsibility for the delegated functions thatthe manager has a reasonable basis to represent, and does represent, that thethird party is performing the required functions; provided that no person mayprovide a certification unless:

(A)  The person is a senior manager withresponsibility for the delegated functions; and

(B)  The person has a reasonable basis formaking the certification; and

(2)  Based on reasonable selection criteria,periodically reviewing the performance of selected third parties contractingunder subsection (f) to determine whether the third parties are performing therequired functions.  The insurer shall perform those procedures to conduct thereview that are reasonable under the circumstances.

(h)  An insurer that contracts with a thirdparty pursuant to subsection (f) and that complies with the requirements tosupervise in subsection (g) shall have fulfilled its responsibilities undersubsection (d).

(i)  An insurer, managing general agent, orindependent agency is not required by subsections (d) and (e) to:

(1)  Review, or provide for review of, all insuranceproducer-solicited transactions; or

(2)  Include in its system of supervision an insuranceproducer's recommendations to consumers of products other than the annuitiesoffered by the insurer, managing general agent, or independent agency.

(j)  A managing general agent or independentagency who contracts with an insurer under subsection (f) shall promptly, whenrequested by the insurer under subsection (g), give a certification asdescribed in subsection (g) or give a clear statement that it is unable tosatisfy the certification criteria.

(k)  Compliance with the National Associationof Securities Dealers Conduct Rules pertaining to suitability shall satisfy therequirements under this section for recommending variable annuities.  Nothingin this subsection shall limit the insurance commissioner's ability to enforcethis part. [L 2007, c 257, pt of §2]