VA Suitability More Important As Boomers Age, Regulators Say

Many of the issues currently being debated about that rule, such as the timing of a proposed "principal review" for variable annuities transactions involving payments made to insurers, would be clarified. "Hopefully, we'll clarify these issues in the notice to members," he said.

While there has been some debate with the industry over the proposed rule, Mr. Kosciulek said he doesn't "envision any substantive changes" to the rule as it is currently proposed, and much of the industry seems to accept that they'll have to adjust their operations to meet it and are now more concerned about the preparation for those changes. "For the most part, firms are just asking when," the measure will take effect, he said.

The aging baby boomer generation is an important factor in the suitability regulation effort, noted John Walsh, associate director and chief counsel for the SEC Office of Compliance Inspections and Examinations, because the growing elderly population will make ensuring consumer protection all the more important. "This is a fundamental long-term shift in our markets," he said, "and in our focus as regulators."

Mr. Walsh said the SEC has a "very active enforcement element" on suitability because "many of these cases involve really fraudulent activity" such as Ponzi schemes or just fake securities.

Recent efforts, he said, have focused on seminars offering seniors a "free lunch" or supposedly neutral financial advice, which can sometimes end up as a sales presentation.

Although he said it's "too early to tell" what the results of that effort will be, Mr. Walsh said firms who host seminars should be asking serious questions about how they advertise such seminars, specifically the degree to which they control the advertising and the claims being made about what the seminar will offer.

Examining these issues is important in case regulators should come asking about the seminar, he said, "both so you have the answers and secondly, so you have answers that you're comfortable with."

Companies should also be sure their representatives can explain why they may have switched products for a consumer. "Can your reps explain why product B is enhanced over product A?" he asked the audience, "and can they document that analysis?"