20-1243.04. Standards for supervision
A. An insurer shall either assure that a system to supervise recommendations that is reasonably designed to achieve compliance with this article is established and maintained by complying with subsections C, D and E, or establish and maintain such a system. Such a system includes:
1. Maintaining written procedures.
2. Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this article.
B. A managing general agent and business entity shall either adopt a system that is established by an insurer to supervise recommendations of its insurance producers and that is reasonably designed to achieve compliance with this article or establish and maintain such a system. Such a system includes:
1. Maintaining written procedures.
2. Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this article.
C. An insurer may contract with a third party, including a managing general agent or business entity, to establish and maintain a system of supervision as required by subsection A with respect to insurance producers under contract with or employed by the third party.
D. An insurer shall make reasonable inquiry to assure that the third party contracting under subsection C is performing the functions required under subsection A and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions. An insurer may comply with the obligation to make reasonable inquiry by doing both of the following:
1. Annually obtaining a certification from a third party senior manager who has responsibility for the delegated functions that the manager has a reasonable basis to represent, and does represent, that the third party is performing the required functions.
2. Based on reasonable selection criteria, periodically select third parties contracting under subsection C for a review to determine if the third parties are performing the required functions. The insurer shall perform those procedures to conduct the review that are reasonable under the circumstances.
E. An insurer that contracts with a third party pursuant to subsection C and that complies with the requirements to supervise in subsection D fulfills its responsibilities under subsection A.
F. An insurer, managing general agent or business entity is not required pursuant to subsection A or B to:
1. Review, or provide for review of, all insurance producer solicited transactions.
2. Include in its system of supervision an insurance producer's recommendations to consumers of products other than the annuities offered by the insurer, managing general agent or business entity.
G. A managing general agent or business entity contracting with an insurer pursuant to subsection C, if requested by the insurer pursuant to subsection D, shall promptly give a certification as described in subsection D or give a clear statement that it is unable to meet the certification criteria.
H. A person shall not provide a certification under subsection D, paragraph 1 unless both of the following apply:
1. The person is a senior manager with responsibility for the delegated functions.
2. The person has a reasonable basis for making the certification.
I. Compliance with the financial industry regulatory authority conduct rules pertaining to suitability satisfies the requirements under this section for the recommendation of annuities registered under the securities act of 1933 (15 United States Code sections 77a through 77aa) or rules adopted thereunder. However, this subsection does not limit the director's ability to enforce this article.