SEC approves FINRA rule governing sales practices of deferred variable annuities

Purpose – The purpose of this paper is to summarize and discuss FINRA Rule 2821, which covers broker‐dealer sales practices with respect to purchases and exchanges of deferred variable annuities. Design/methodology/approach – The paper describes the transactions to which the rule applies; summarizes the four primary components, which relate to suitability obligations, review and approval, supervisory procedures, and training programs; discusses the background and history of the rule; and explains a conditional exemption from Rules 15c3‐3 and 15c3‐1 that permit a principal's review of transactions subject to Rule 2821 for up to seven days without triggering requirements for additional capital or customer reserve accounts. Findings – The paper finds that deferred variable annuities now join a very small group of securities products that have their own custom suitability requirements. Originality/value – The paper provides practical guidance by experienced lawyers specializing in financial services.