Annuities

Correct

The answer is B: Yes, because FIAs are fixed annuities, not securities, so a life license suffices.

A Fixed Indexed Annuity is legally a type of fixed annuity. The insurer bears the investment risk and the principal is protected by a minimum guarantee, so it is not a security and needs no securities registration. Carlos can sell it under his life license, provided he meets Texas annuity training rules: a one-time four-credit annuity training course and the insurer's product training (Insurance Code §1115.056). This is a common exam trap because FIAs are tied to a market index, which leads candidates to think a securities license is required. Annuities that are registered securities, such as variable annuities and registered index-linked annuities, do require a Series 6 or 7.

Source: Insurance Code §1115.056

Correct

The answer is B: In a separate account, segregated from the insurer's general assets.

Variable annuity subaccount funds are held in the insurer's separate account, which is kept apart from its general account. Because the owner bears the investment risk in those subaccounts, a variable annuity is a security, so the agent needs FINRA registration in addition to a Texas general life, accident and health license (Insurance Code §4054.051). Fixed and indexed annuity funds are held in the general account, where the insurer bears the investment risk.

Source: Insurance Code §4054.051

Correct

The answer is C: Age, income, liquidity needs, risk tolerance, and tax status.

Chapter 1115's care obligation requires the agent to obtain the consumer's profile information before recommending an annuity (§1115.0513). That profile includes the consumer's age, annual income, financial situation and needs, financial objectives, intended use of the annuity, financial time horizon, existing assets, liquidity needs, liquid net worth, risk tolerance, tax status and financial experience (§1115.002). The agent must use this information to form a reasonable basis for the recommendation and document it. Demographic information unrelated to financial circumstances (political views, religion) is not part of the analysis.

Source: Insurance Code §1115.0513 · Insurance Code §1115.002

Correct

The answer is D: Document the consumer's information and the basis for the recommendation.

Chapter 1115's documentation obligation requires the agent, at the time of the recommendation or sale, to make a written record of the recommendation and its basis (§1115.0516). Agents and insurers must keep the consumer information collected and other information used in the recommendation for five years and make it available to the commissioner (§1115.055). Documentation is NOT filed with TDI on every sale. Good-faith belief without documented analysis does not satisfy the rule because it cannot be verified by regulators.

Source: Insurance Code §1115.0516 · Insurance Code §1115.055