Regulatory Compliance & Ethical Practices Flashcards
7 cards from real RAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Ethical Practices flashcards as text
Under FINRA Rule 2330, a principal must review and approve a deferred variable annuity application within how many business days of the customer's signed application?
Answer: 7 business days
FINRA Rule 2330 requires a registered principal to review and approve or reject a deferred variable annuity application within 7 business days of receiving the customer's signed application.
A client wants to do a 1035 exchange from an existing annuity to a new one. Which ethical concern must the advisor FIRST address?
Answer: Whether the exchange is in the client's best interest given surrender charges and new surrender periods
Before recommending a 1035 exchange, the advisor must determine whether the exchange genuinely benefits the client, factoring in existing surrender charges, new surrender periods, and any loss of benefits.
Which federal law primarily governs the anti-money laundering (AML) obligations of insurance companies selling annuities?
Answer: Bank Secrecy Act
The Bank Secrecy Act (BSA) requires insurance companies to establish AML programs and file Suspicious Activity Reports (SARs) for potentially illicit transactions involving annuities.
An annuity advisor discovers a client's existing annuity has no surrender charges remaining. The advisor recommends switching to a new annuity with a 10-year surrender period to earn a higher commission. This is an example of:
Answer: Twisting
Twisting is the unethical and often illegal practice of inducing a client to replace an existing insurance or annuity contract primarily for the agent's financial gain rather than the client's benefit.
Under the NAIC Suitability in Annuity Transactions Model Regulation, which of the following is NOT one of the required suitability factors an advisor must consider?
Answer: The insurer's current stock price
The NAIC model regulation requires consideration of financial situation, tax status, investment objectives, risk tolerance, and time horizon — not the insurer's stock price.
A state insurance department conducts a market conduct examination of an annuity producer. Which of the following would most likely trigger a compliance violation finding?
Answer: Failing to provide a free-look notice
Failure to provide the required free-look notice — which allows clients to return the annuity contract within a specified period — is a clear and commonly cited market conduct violation.
When an advisor receives a gift from an annuity product wholesaler, what is the primary ethical concern under FINRA gift rules?
Answer: Whether the gift could improperly influence the advisor's product recommendations
FINRA Rule 3220 limits gifts to $100 per year per person from anyone connected to a securities transaction to prevent gifts from improperly influencing an advisor's product recommendations.