26.1-34.2-02. Definitions

26.1-34.2-02. Definitions

1. "Annuity" means an annuity that is an insurance product under state law which is

individually solicited, whether the product is classified as an individual or group

annuity.

2. "Cash compensation" means a discount, concession, fee, service fee, commission,

sales charge, loan, override, or cash benefit received by a producer in connection with

the recommendation or sale of an annuity from an insurer or intermediary or directly

from the consumer.

3. "Comparable standards":

a. With respect to a broker-dealer and registered representative of a broker-dealer,

applicable federal securities and exchange commission and financial industry

regulatory authority rules pertaining to best interest obligations and supervision of

annuity recommendations and sales, including Regulation Best Interest

[17 CFR 240];

b. With respect to an investment adviser registered under federal or state securities

laws or an investment adviser representative, the fiduciary duties and all other

requirements imposed on such investment advisers or investment adviser

representatives by contract or under the federal Investment Advisers Act of 1940

[15 U.S.C. 80b-1 et seq.] or applicable state securities law, including, the form

ADV and interpretations; and

c. With respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions,

and all other requirements attendant to such status under the federal Employee

Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] or the federal

Internal Revenue Code as amended.

4. "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:

a. Age;

b. Annual income;

c. Financial situation and needs, including debts and other obligations;

d. Financial experience;

e. Insurance needs;

f. Financial objectives;

g. Intended use of the annuity;

h. Financial time horizon;

i. Existing assets or financial products, including investment, annuity, and insurance

holdings;

j. Liquidity needs;

k. Liquid net worth;

l. Risk tolerance, including willingness to accept nonguaranteed elements in the

annuity;

m. Financial resources used to fund the annuity; and

n. Tax status.

5. "Continuing education credit" means one continuing education credit as provided for

under section 26.1-26-31.1.

6. "Continuing education provider" means an individual or entity approved to offer

continuing education courses pursuant to section 26.1-26-31.1.

7. "Financial professional" means a producer that is regulated and acting as:

a. A broker-dealer registered under federal or state securities laws or a registered

representative of a broker-dealer;

b. An investment adviser registered under federal or state securities laws or an

investment adviser representative associated with the federal or state registered

investment adviser; or

c. A plan fiduciary under section 3(21) of the federal Employee Retirement Income

Security Act of 1974 [29 CFR 2510.3-21] or fiduciary under section 4975(e)(3) of

the Internal Revenue Code [26 U.S.C. 4975(e)(3)] as amended.

8. "Insurer" means a company required to be licensed under the laws of this state to

provide insurance products, including annuities.

9. "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 producers.

10. "Material conflict of interest" means a financial interest of the producer in the sale of an

annuity which a reasonable person would expect to influence the impartiality of a

recommendation. The term does not include cash compensation or noncash

compensation.

11. "Noncash compensation" means any form of compensation that is not cash

litate the sale of the insurer's annuities by producers.

10. "Material conflict of interest" means a financial interest of the producer in the sale of an

annuity which a reasonable person would expect to influence the impartiality of a

recommendation. The term does not include cash compensation or noncash

compensation.

11. "Noncash compensation" means any form of compensation that is not cash

compensation, including health insurance, office rent, office support, and retirement

benefits.

12. "Nonguaranteed elements" means the premiums, credited interest rates, including a

bonus, benefits, values, dividends, noninterest based credits, charges, or elements of

formulas used to determine any of these which 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.

13. "Producer" means an individual or entity required to be licensed under the laws of this

state to sell, solicit, or negotiate insurance, including annuities. The term includes an

insurer if no producer is involved.

14. "Recommendation" means advice provided by a producer to an individual consumer

which was intended to result or results in a purchase, a replacement, or an exchange

of an annuity in accordance with that advice. The term does not include general

communication to the public, generalized customer services assistance or

administrative support, general educational information and tools, prospectuses, or

other product and sales material.

15. "Replacement" means a transaction in which a new annuity is to be purchased, and it

is known or should be known to the proposing producer, or to the proposing insurer

whether or not a producer is involved, that by reason of the transaction, an existing

annuity or other insurance policy has been or is to be any of the following:

a. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing

insurer, or otherwise terminated;

b. 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;

c. 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;

d. Reissued with any reduction in cash value; or

e. Used in a financed purchase.