A. In recommending to a consumer the purchase of an annuity, the exchange of an annuity, or the replacement of an annuity, any of which results in another insurance transaction or series of insurance transactions, an insurance producer, or an insurer where no insurance producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer based on:
(1) The facts disclosed by the consumer as to the consumer's:
(a) Investments and other insurance products; and
(b) Financial situation and needs, including the consumerís suitability information; and
(2) All of the following:
(a) The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk;
(b) The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, death benefit, or living benefit;
(c) The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable (and in the case of an exchange or replacement, the transaction as a whole is suitable) for the particular consumer based on the consumerís suitability information; and
(d) In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration whether:
(i) The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living, or other contractual benefits), or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;
(ii) The consumer would benefit from product enhancements and improvements; and
(iii) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.
B. Prior to the execution of a purchase, exchange, or replacement of an annuity resulting from a recommendation, an insurance producer, or an insurer where no insurance producer is involved, shall make reasonable efforts to obtain the consumerís suitability information.
C. Except as provided under §D of this regulation, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumerís suitability information.
D. Circumstances When No Obligation Exists.
(1) Except as provided under §D(2) of this regulation, neither an insurance producer, nor an insurer where no insurance producer is involved, has any obligation to a consumer under §A or C of this regulation related to any annuity transaction if:
(a) No recommendation is made;
(b) A recommendation was made and was later found to have been prepared based on inaccurate material information provided by the consumer;
(c) A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended; or
(d) A consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance producer.
(2) An insurerís issuance of an annuity subject to subsection (1) of this section shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.
E. An insurance producer or, where no insurance producer is involved, the responsible insurer representative shall at the time of sale:
(1) Make a record of any recommendation subject to §A of this regulation;
(2) Obtain a consumer signed statement documenting a consumerís refusal to provide suitability information, if applicable; and
(3) Obtain a consumer signed statement acknowledging that an annuity transaction is not recommended if a consumer decides to enter into an annuity transaction that is not based on the insurance producerís or insurerís recommendation.