California Gov. Gavin Newsom announced today that he has signed state Senate Bill 263, a bill adopting the National Association of Insurance Commissioners' annuity sales standard update.
The signing makes California the 44th state to adopt the NAIC model update, which is based on the U.S. Securities and Exchange Commission's Regulation Best Interest.
The model update requires sellers of annuities to act in the consumer's best interest and disclose potential conflicts of interest, but it does not require the seller to act as a fiduciary or to move away from collecting sales commissions.
The model stands in opposition to the U.S. Department of Labor's proposed fiduciary definition proposals, which could impose a fiduciary standard of care on any individuals and companies providing investment advice to consumers who are rolling assets over from 401(k) plans, individual retirement arrangements and other retirement accounts.
Current California rules require annuity sellers to meet a suitability standard and to verify that the annuities sold to consumers meet their needs.
What it means: Newsom is a Democrat and the leader of the most populous U.S. state. His decision to sign SB 263 may weaken the Biden administration's efforts to finalize and implement the DOL's proposals.
SB 263: California Insurance Commissioner Ricardo Lara, an elected Democrat, backed adoption of the NAIC model update in California.
California state Sen. Bill Dodd, D-Napa, introduced the update bill in January 2023.
Some California consumer groups, including the Life Insurance Consumer Advocacy Center and AARP California, opposed the bill, but the bill sailed through the California Legislature.
