Fiduciary/Best Interest Development
- Effective January 1, 2023, South Dakota adopted rules establishing best interest standards on insurance producers and insurers for annuity recommendations to consumers and issued Bulletin 22-03 providing guidance on the new rules.
- These standards do not create a fiduciary relationship.
- When making a recommendation, the producer must act in the best interest of the consumer and must know the consumer’s needs, understand the annuity options they are recommending, obtain consumer profile information and apply careful consideration if replacing or exchanging annuities.
- Prior to or at the time of the recommendation, the producer must disclose important information to the consumer including the scope and terms of the relationship with the consumer, the role of the producer in the transaction, a description of the compensation to be received by the producer and notice of the consumer’s right to request additional information about the compensation.
- Producers must identify and avoid or reasonably manage and disclose material conflicts of interest.
- Producers must document compliance with the new standards.
- Insurance companies must establish and maintain a system to supervise recommendations to ensure consumer needs and objectives are effectively addressed.
- Insurance producers who offer annuity recommendations made in compliance with comparable standards as a registered broker-dealer, investment advisor, or ERISA plan fiduciary are deemed to satisfy these best interest standards.
Senate Bill 148, South Dakota Codified Laws 58-33A-16
South Dakota Bulletin 22-03