Haw. Rev. Stat. § 431:10D-622

Current through the 2024 Legislative Session

Section 431:10D-622 - Definitions

For the purposes of this part:

"Annuity" means an annuity that is an insurance product under state law that is individually solicited, whether the product is classified as an individual or group annuity.

"Approved continuing education course provider" means an individual or entity that is approved to offer continuing education courses pursuant to article 9A.

"Cash compensation" means any 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, intermediary, or directly from the consumer.

"Comparable standards" means:

(1) With respect to broker-dealers and registered representatives of broker-dealers, applicable United States Securities and Exchange Commission and Financial Industry Regulatory Authority rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including but not limited to Regulation Best Interest, title 17 Code of Federal Regulations section 240.15l-1, and any amendments or successor regulations thereto;

(2) With respect to investment advisers registered under federal or state securities laws or investment adviser representatives, the fiduciary duties and all other requirements imposed on the investment advisers or investment adviser representatives by contract or under the Rules and Regulations, Investment Company Act of 1940, title 17 Code of Federal Regulations part 270, or applicable state securities law, including but not limited to the Form ADV and interpretations; and

(3) With respect to fiduciaries or plan fiduciaries, the duties, obligations, prohibitions, and all other requirements attendant to such status under the Employee Retirement Income Security Act of 1974, P.L. 93-406, or the Internal Revenue Code of 1986, as amended, and any amendments or successor statutes thereto.

"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:

(1) Age;

(2) Annual income;

(3) Financial situation and needs, including debts and other obligations;

(4) Financial experience;

(5) Insurance needs;

(6) Financial objectives;

(7) Intended use of the annuity;

(8) Financial times horizon;

(9) Existing assets or financial products, including investment, annuity, and insurance holdings;

(10) Liquidity needs;

(11) Liquid net worth;

(12) Risk tolerance, including but not limited to willingness to accept non-guaranteed elements in the annuity;

(13) Financial resources used to fund the annuity; and

(14) Tax status.

"Continuing education credit" means one continuing education credit hour. For the purposes of this definition, "credit hour" has the same meaning as set forth in section 431:9A-102.

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

(1) A broker-dealer registered under federal or state securities laws or a registered representative of a broker-dealer;

(2) 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

(3) A plan fiduciary under section 3(21) of the Employee Retirement Income Security Act of 1974, P.L. 93-406, or fiduciary under section 4975(E)(3) of the Internal Revenue Code of 1986, as amended, or any amendments or successor statutes thereto.

"Insurer" means a company required to be licensed under the laws of this State to provide insurance products, including annuities.

"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.

"Material conflict of interest" means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation. "Material conflict of interest" does not include cash compensation or non-cash compensation.

"Non-cash compensation" means any form of compensation that is not cash compensation, including but not limited to health insurance, office rent, office support, and retirement benefits.

"Non-guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, dividends, non-interest based credits, charges, or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element shall be considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

"Producer" means a person or entity required to be licensed under the laws of this State to sell, solicit, or negotiate insurance, including annuities. "Producer" includes an insurer where no producer is involved.

"Recommendation" means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, an exchange, or a replacement of an annuity in accordance with that advice. "Recommendation" 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.

"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 may be any of the following:

(1) Terminated, lapsed, forfeited, or surrendered, partially surrendered, or assigned to the replacing insurer;

(2) 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;

(3) Amended to effect a reduction in either benefits or the term for which coverage would otherwise remain in force or for which benefits would be paid;

(4) Reissued with any reduction in cash value; or

(5) Used in a finance purchase.

HRS § 431:10D-622

Amended by L 2022, c 58,§ 7, eff. 1/1/2023.

Amended by L 2012, c 66, § 13, eff. 1/1/2012.

Amended by L 2011, c 108, § I-4, eff. 1/1/2012.

L 2007, c 257 , pt of §2 .