RAA Regulatory Compliance & Ethical Practices 2

Question 1

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?

Accepted Answer

7 business days

Answer

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.

Question 2

A client wants to do a 1035 exchange from an existing annuity to a new one. Which ethical concern must the advisor FIRST address?

Accepted Answer

Whether the exchange is in the client's best interest given surrender charges and new surrender periods

Answer

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.

Question 3

Which federal law primarily governs the anti-money laundering (AML) obligations of insurance companies selling annuities?

Accepted Answer

Bank Secrecy Act

Answer

The Bank Secrecy Act (BSA) requires insurance companies to establish AML programs and file Suspicious Activity Reports (SARs) for potentially illicit transactions involving annuities.

Question 4

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:

Accepted Answer

Twisting

Answer

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.

Question 5

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?

Accepted Answer

The insurer's current stock price

Answer

The NAIC model regulation requires consideration of financial situation, tax status, investment objectives, risk tolerance, and time horizon — not the insurer's stock price.

(RAA) Registered Annuity Advisor Practice Test

(RAA) Registered Annuity Advisor Practice Test

RAA Regulatory Compliance & Ethical Practices 2