CHAPTER 11

MISREPRESENTATION

A FALSE OR MISLEADING STATEMENT.

FINRA CONDUCT RULE 2821

A FIRNA RULE THAT CONSIDERABLY EXPANDS THE REQUIREMENTS OF THE SUITABILITY RULE BY SPECIFYING CRITERIA TO BE TAKEN INTO CONSIDERATION IN MAKING A SUITABILITY DETERMINATION FOR THE PURCHASE OR EXCHANGE OF A DEFERRED VARIABLE ANNUITY.

SUPERVISORY RULE (FINRA CONDUCT RULE 3010)

A FIRNA RULE THAT REQUIRES BROKER-DEALERS TO ESTABLISH AND MAINTAIN, IN ACCORDANCE WITH WRITTEN PROCEDURES, A SYSTEM TO SUPERVISE THE ACTIVITIES OF THEIR REGISTERED REPRESENTATIVES AND REGISTERED PRINCIPALS

MODEL LAW

A SAMPLE LAW OFFERED BY THE NAIC THAT THE STATES ARE ENCOURAGED TO USE AS A BASIS FOR THEIR LAWS.

MODEL REGULATION

A SAMPLE REGULATION OFFERED BY THE NAIC THAT THE STATES ARE ENCOURAGED TO USE AS A BASIS FOR THEIR REGULATIONS.

REBATING

A SLAES PRACTICE, PROHIBITED IN MOST STATES, IN WHICH AN INSURER OR INSURANCE PRODUCER OFFERS A PROSPECT AN INDUCEMENT TO PURCHASE AN INSURANCE POLICY OR ANNUITY , AND THE INDUCEMENT IS NOT OFFERED TO ALL APPLICANTS IN SIMILAR SITUATIONS AND IS NOT STATED IN THE POLICY ITSELF.

LIFE INSURANCE BUYER'S GUIDE

A STANDARDIZED BUYER'S GUIDE THAT DESCRIBES IN GENERAL LANGUAGE THE BASIC TYPES OF LIFE INSURANCE AND THE COSTS AND BENEFITS INVOLVED WITH EACH TYPE, HOW TO DETERMINE THE AMOUNT OF LIFE INSURANCE NEEDED, AND THE OTHER FACTORS TO BE CONSIDERED BEFORE PURCHASING A LIFE INSURANCE POLICY.

UNFAIR TRADE PRACTICES ACT

AN NAIC MODEL LAW WHICH IDENTIFIES A NUMBER OF GENERAL INSURER PRACTICES THAT ARE PROHIBITED IF COMMITTED (1) FLAGRENTLY, IN CONCIOUS DISREGARD OF THE LAW, OR (2) SO REQUENTLY AS TO INDICATE A GENERAL BUSINESS PRACTICE.

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

AN NAIC MODEL LAW WHICH REQUIRES MOST INDIVIDUAL LIFE INSURANCE POLICIES TO PROVIDE SPECIFIED MINIMUM NONFORFEITURE VALUES.

CERTIFICATE OF AUTHORITY

IN THE UNITED STATES, A DOCUMENT ISSUED BY A STATE INSURANCE DEPARTMENT THAT GRANTS A COMPANY THE RIGHT TO CONDUCT BUSINESS IN THAT STATE.

STATE INSURANCE DEPARTMENT

IN THE UNITED STATES, A STATE ADADMINISTRATIVE AGENCY RESPONSIBLE FOR ISSUING CERTIFICATES OF AUTHORITY AND OTHERWISE ADMINISTERING THE STATE INSURANCE CODE.

STATE INSURANCE CODE

IN THE UNITED STATES, THAT LAWS THAT REGULATE THE BUSINESS OF INSURANCE IN A STATE.

INSURANCE COMMISSIONER

IN THE UNITED STATES, THE INDIVIUAL WHO DIRECTS THE OPERATION OF A STATE INSURANCE DEPARTMENT.

NONPUBLIC PERSONAL INFORMATION

PERSONALLY INDENTIFIABLE FINANCIAL INFORMATION THAT A CONSUMER PROVIDES TO A FINANCIAL INSTITUTION, INCLUDING BANKS AND INSURANCE COMPANIES, WHICH IS NOT PUBLICALLY AVAILABLE.

REGULATIONS

RULE OR ORDERS THAT EXPLAIN OR HELP IMPLEMENT THE PROVISIONS OF A STATE INSURANCE CODE.

TARGET EXAMINATION

A LIMITED-SCOPE EXAMINATION, CONDUCTED BY A STATE INSURANCE DEPARTMENT, OF ONE OR MORE LINES OF BUSINESS OR SPECIFIC AREAS OF AN INSURER'S NONFINANCIAL OPERATIONS, SUCH AS ADVERTISING MATERIALS.

LIFE INSURANCE AND ANNUITITES REPLACEMENT MODEL REGULATION (MODEL REPLACEMENT REGULATION)

A NAIC MODEL REGULATION DEVELOPED TO ENSURE THAT INSURERS AND INSURANCE PRODUCERS PROVIDE CONSUMERS WITH FAIR AND ACCURATE INFORMATION ABOUT POLICIES SO THAT CONSUMERS CAN MAKE PURCHASE DECISIONS THAT ARE IN THEIR OWN BEST INTERESTS.

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC)

A PRIVATE, NON-PROFIT ASSOCIATION OF THE INSURANCE COMMISSIONERS OF ALL 50 STATES, THE DISTRICT OF COLUMBIA, AND THE 4 US TERRITORIES THAT PROMOTES UNIFORMITY OF STATE REGULATION BY DEVELOPING MODEL LAWS AND REGULATONS AS GUIDELINES FOR THE STATES.

TWISTING

A PROHIBITED TRADE PRACTICE THAT OCCURES WHEN AN INSURANCE PRODUCER MISREPRESENTS THE FEATURES OF A POLICY TO INDUCE A CUSTOMER TO REPLACE AN EXISTING POLICY.

MISSTATEMENT OF AGE PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT STATING THAT IF THE INSURED'S AGE WAS MISSTATED ON THE APPLICATION, THEN THE AMOUNT OF BENEFITS PAYABLE WILL BE ADJUSTED TO THE AMOUNT PREMIUMS PAID WOULD HAVE PURCHASED FOR A PERSON OF THE CORRECT AGE.

NONFORFEITURE PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT STATING THE AMOUNT OF BENEFITS THAT THE INSURER WILL PAY IF THE POLICYOWNER STOPS MAKING REQUIRED PREMIUM PAYMENTS ON OR SURRENDERS A POLICY THAT HAS A CASH VALUE, HOW THOSE BENEFITS ARE CALCULATED, AND WHAT OPTIONS THE POLICYOWNER HAS REGARDING THE TYPES OF BENEFITS AVAILABLE.

FREE-LOOK PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT THAT GIVES A POLICYOWNER A SPECIFIED PERIOD, USUALLY 10-30 DAYS, WITHIN WHICH TO CANCEL THE POLICY AND RECIEVE A FULL REFUND OF ALL PREMIUMS PAID.

REINSTATEMENT PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT THAT GIVES THE POLICYHOLDER THE RIGHT TO REINSTATE THE CONTRACT TI FULL PAID-UP STATUS WITHIN A CERTIAN PERIOD OF TIME AFTER THE POLICY HAS EXPIRED BY PAYING ALL UNPAID AND OUTSTANDIND PREMIUMS PLUS INTEREST AND SATISFYING AND OTHER REQUIREMENTS OF THE PROVISION.

GRACE PERIOD PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT THAT GRANTS A CONTRACT OWNER THE RIGHT TO PAY ANY REQUIRED PREMIUM WITHIN A SPECIFIED PERIOD, USUALLY 30 OR 31 DAYS, AFTER THE PREMIUM DUE DATE.

INCONTESTIBILITY PROVISION

A PROVISION IN A LIFE INSURANCE CONTRACT THAT STATES THAT A POLICY WILL BE INCONTESTABLE, OTHER THAN FOR NONPAYMENT OF PREMIUMS, AFTER IT HAS BEEN IN FORCE DURING THE LIFETIME OF THE INSURED FOR A CERTIAN PERIOD OF TIME AFTER ISSUE, USUALLY 1 OR 2 YEARS.

UNFAIR DISCRIMINATION PROVISION

A PROVISION IN A STATE PROVISION CODE DESIGNED TO ENSURE THAT ALL INDIVIDUALS IN THE SAME UNDERWRITING CLASSIFICATION ARE TREATED ALIKE.

ENTIRE CONTRACT PROVISION

A PROVISION STATING THAT THE ENTIRE CONTRACT CONSISTS OF THE LIFE INSURANCE POLICY; THE APPLICATION, IF IT IS ATTACHED TO THE POLICY; AND ANY ATTACHED RIDERS AND ENDORSEMENTS.

SUITABILITY REQUIREMENT

A REQUIREMENT THAT IMPOSES A DUTY ON PRODUCERS TO HAVE REASONABLE GROUNDS ON WHICH TO BELIEVE THAT A SPECIFIC PRODUCT IS SUITABLE FOR A PARTICULAR CUSTOMER'S NEEDS.

PRUDENTIAL REGULATION

A TERM USED TO DESCRIBE SOLVENCY REGULATION IN MANY COUNTRIES OTHER THAN THE UNITED STATES.

INSURANCE MARKETPLACE STANDARDS ASSOCIATION (IMSA)

A VOLUNTARY ASSOCIATION OF INSUREDS DESIGNED TO ENABLE LIFE INSURANCE COMPANIES TO MONITOR THEIR OWN COMPLIANCE WITH REGULATORY REQUIREMENTS AND TO PROMOTE HIGH ETHICAL STANDARDS IN THE SALE OF LIFE INSURANCE, LONG-TERM CARE, AND ANNUITY PRODUCTS.

PROSPECTUS

A WRITTEN DOCUMENT THAT DESCRIBES SPECIFIC ASPECTS OF A SECURITY, VARIABLE LIFE INSURANCE PRODUCT, OR VARIABLE ANNUITY BEING OFFERED FOR SALE THAT, ACCORDING TO SEC RULESMUST BE PROVIDED TO A POTENTIALPURCHASER OF ANY SUCH PRODUCT.

ADVERTISEMENTS OF ACCIDENT AND SICKNESS INSURANCE MODEL REGULATION

AN NAIC MODEL REGULATION WHICH ESTABLISH MINIMUM STANDARDS OF ACCURACY AND FAIRNESS WHILE REQUIRING INSURERS TO DISCLOSE TO THE PUBLIC ALL RELEVANT INFORMATION IN ADVERTISEMENTS FOR LIFE INSURANCE AND ANNUITIES.

ANNUITY DISCLOSURE MODEL REGULATION

AN NAIC MODEL REGULATION WHICH REQUIRES INSURERS TO PROVIDE PROSPECTIVE PURCHASERS OF SPECIFIED TYPES OF ANNUITIES WITH INFORMATION TO HELP THEM SELECT AN APPROPIATE POLICY.

SUITABILITY IN ANNUITY TRANSACTIONS MODEL REGULATION

AN NAIC MODEL REGULATION WHICH REQUIRES PRODUCERS TO TAKE SPECIFIC MEASURES TO ENSURE THE SUITABILITY OF ANY PURCHASE OR EXCHANGE OF AN ANNUITY CONTRACT WHICH RESULTS IN ANOTHER INSURANCE TRANSACTION, SUCH AS USING THE SURRENDER VALUE OF AN ANNUITY TO PURCHASE ANOTHER ANNUITY OR PAID UP LIFE INSURANCE POLICY.

TYING ARANGEMENT

AN ORGANIZATION CONDITIONING THE SALE OF ONE PRODUCT OR SERVICE ON THE SALE OF ONE OR MORE OF THE ORGANIZATION'S OTHER PRODUCTS OR SERVICES.

CHURNING

AN UNFAIR TRADE PRACTICE THAT OCCURES WHEN A PRODUCER INDUCES A CUSTOMER TO REPLACE ON POLICY WITH ANOTHER MULTIPLE TIMES SO THAT THE PRODUCER CAN EARN A SERIES OF HIGH FIRST-YEAR COMMISSIONS ON THE REPLACEMENTS.

COMMINGLING OF FUNDS

AN UNFAIR TRADE PRACTICE THAT OCCURS WHEN A PRODUCER COMBINES MONIES BELONGING TO OTHERS WITH HER OWN FUNDS, EVEN ON A TEMPORARY BASIS.

MISAPPROPIATION

THE ILLEGAL MISUSE OF A CUSTOMER'S OR AN INSURERS MONEY, EVEN IF THE USE IS ON A TEMPORARY BASIS.

FUNCTIONAL REGULATION

THE PRINCIPLE THAT A SINGLE REGULATORY BODY SHOULD OVERSEE SIMILAR FINANCIAL ACTIVITIES, REGARDLESS OF WHICH TYPE OF FINANCIAL INSTITUTION ENGAGES IN THE ACTIVITY.

FINANCED PURCHASE

THE PURCHASE OF A NEW POLICY FOR WHICH THE OWNER INTENDS TO PAY PREMIUMS USING FUNDS TAKEN FROM ANOTHER POLICY.

CEAST AND DESIST ORDER

A LEGALLY ENFORCEABLE DECLARATION BY A STATE INSURANCE DEPARTMENT THAT AN OFFENDER MUST STOP ENGAGING IN PROHIBITED CONDUCT.

REGISTRATION STATEMENT

A DOCUMENT FILES WITH THE SEC TO REGISTER A VARIABLE INSURANCE PRODUCT AND OTHER FINANCIAL PRODUCTS SUBJECT TO SEC REGULATION THAT CONTAINS DETAILED INFORMATION ABOUT THE VARIABLE PRODUCT AND THE INSURER, INCLUDING SPECIFIED FINANCIAL STATEMEENTS.

POLICY SUMMARY

A DOCUMENT THAT THE NAIC LIFE INSURANCE DISCLOSURE MODEL REGULATION REQUIRES TO GIVE PROSPECTIVE CUSTOMERS AND THAT CONTAINS DETAILED INFORMATION ABOUT THE SPECIFIC PPOLICY BEING CONSIDERED FOR PURCHASE.

ADVERTISEMENT RULE (FINRA CONDUCT RULE 2210)

A FINRA RULE THAT IMPOSES A NUMBER OF REQUIREMENTS ON ADVERTISEMENTS AND SALES LITERATURE PERTAINING TO SECURITIES, INCLUDING VARIABLE PRODUCTS, THAT ARE USED TO COMMUNICATE WITH THE PUBLIC.

SUITABILITY RULE (FINRA CONDUCT RULE 2310)

A FINRA RULE THAT REQUIRES MEMBERS TO HAVE REASONABLE GROUNDS FOR MAKING AN INVESTMENT RECOMMENDATION TO A CUSTOMER BASED ON THE FACTS DISCLOSED BY THE CUSTOMER AS TO HIS OTHER SECURITY HOLDINGS, FINANCIAL SITUATION, AND NEEDS.

MARKET CONDUCT EXAMINATION

A FORMAL INVESTIGATION OF AN INSURER CONDUCTED BY ONE OR MORE STATE INSURANCE DEPARTMENTS THAT IS DESIGNED TO DETERMINE WHETHER THE INSURER'S MARKET CONDUCT COMPLIES WITH APPLICABLE LAWS AND REGULATIONS.

COMPREHENSIVE EXAMINATION

A FULL-SCOPE EXAMINATION OF ALL NON-FINANCIAL ASPECTS OF AN INSURER'S OPERATIONS CONDUCTED BY A STATE INSURANCE DEPARTMENT.

LIFE INSURANCE DISCLOSURE MODEL REGULATION

AN NAIC MODEL REGULATION THAT REQUIRES INSURERS TO PROVIDE PROSPECTIVE PURCHASERS OF MOST INDIVIDUAL LIFE INSURANCE POLICIES WITH INFORMATION TO HELP THEM SELECT AN APPROPIATE POLICY.

ADVERTISEMENTS OF LIFE INSURANCE AND ANNUITIES MODEL REGULATION

AN NAIC MODEL REGULATION WHICH ESTABLISH MINIMUM STANDARDS OF ACCURACY AND FAIRNESS WHILE REQUIRING INSURERS TO DISCLOSE TO THE PUBLIC ALL RELEVANT INFORMATION IN ADVERTISEMENTS FOR HEALTH INSURANCE