July 2, 2008
With respect to the proposed amendment to FINRA Rule 2821, I agree that the Rule should only apply to a solicited or a recommended purchase (or a solicited or recommended purchase as part of an exchange transaction), of a deferred variable annuity, and I am strongly in favor of this change in the proposal.
Although seven business days seems like a reasonable period of time, If there is no perceived investor harm, ten business days would be preferable, now that the proposal indicates that the clock will start from the time a signed application is received from the client, at the OSJ. Even though some broker-dealers have designated certain branch offices as OSJ’s, not every OSJ manager has the power to approve these types of transactions. In those cases, the OSJ would usually re-send the application to another location, (often to the broker dealer main office), where a “final” review and approval would occur, as contemplated under the Rule. In addition, it is my understanding that a producing OSJ manager (which is quite common among independent contractor rep type of broker-dealers) can not approve an application for his or her own client—which therefore necessitates a second Principal review and approval. That second Principal is often located in another physical location.
The commentary about inquiring whether the client has had a prior exchange transaction within 36 months seems to be limited to any exchange transaction conducted through or by a broker-dealer. If the regulatory interest is customer protection, why not broaden the inquiry to include any exchange transaction done by the client, regardless of whether a broker-dealer was involved--if the regulatory intent is to determine whether the client is exchanging too often. However, it should also be acceptable to note that a client may decline to answer questions about his or her prior business dealings or questions about those investment and business transactions that are done by the client “away” from the particular broker-dealer, for whatever reasons. We need to recognize that a client should be able to keep such matters separate and private, if he or she so chooses.
Neal E. Nakagiri
President, CEO, CCO
NPB Financial Group, LLC
3500 W. Olive Avenue, Suite 300
Burbank, California 91505