Certain life insurance agents and broker-dealer firms could face increased legal liability depending on how the U.S. Securities & Exchange Commission rules on the fiduciary standard pertaining to the sale of investment products.

Financial regulatory reforms that affect fiduciary standards pertaining to the sale of investment products may impact life insurance agents and broker-dealers, according to a report released today.

Under the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC is being directed to review the obligations and legal “standards of care” applied to broker-dealers and investment advisers when providing investment advice about securities to individual investors. That report to Congress is due within six months, notes an A.M. Best report.

In a speech posted on its website, SEC Chairman Mary Schapiro said that investment advisers are held to a fiduciary standard (they must put the interest of their clients before their own), whereas a broker-dealer must observe standards that include an obligation to make recommendations that are suitable for their clients.

The problem, say experts, is that a uniform standard may hurt captive agency business, mainly due to the nature of the role--restrictions that apply to being a captive: selling only a single company’s products.

Currently, many insurance agents who sell securities-linked insurance and investment products, such as variable annuities and variable life insurance, along with mutual funds, must also be registered with and licensed by a broker-dealer, notes the A.M. Best report.

There are about 11,500 investment adviser firms and 5,400 broker-dealer firms registered with the SEC. Many life insurers, including MetLife, Prudential Financial, New York Life and Northwestern Mutual, also have broker-dealer subsidiaries.

When the study is completed, the SEC will be authorized to write rules "that would create a uniform standard of conduct for professionals who provide personalized investment advice to retail customers," Schapiro said in the letter.

It's not known whether the SEC will rule that everyone must be subject to the same standard, said the A.M. Best report. The comment period is open for 30 days after the Federal Register publishes the comment request, the SEC said on July 27.

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