General Securities Sales Supervisor (Series10) Practice Exam

What is required for other FINRA member firms to sell variable annuity contracts?

1. A written sales contract

2. Being registered broker-dealers

3. Both a written sales contract and registration

4. Approval from the issuing insurance company

The correct answer is: Both a written sales contract and registration

To sell variable annuity contracts, other FINRA member firms must meet specific regulatory requirements, which include two critical components: having a written sales contract and being registered as broker-dealers. The requirement for a written sales contract ensures that there is a formal agreement in place that outlines the terms of the sale and protects both the client and the firm by clearly defining the contractual obligations. This documentation is essential for compliance and serves as a point of reference in case of disputes or misunderstandings regarding the terms of the variable annuity. Being registered as broker-dealers is imperative because only firms that are registered can legally engage in the sale of securities, including variable annuities, which are classified as securities due to their investment components. This registration provides consumer protection and ensures that the firm adheres to the regulatory standards set forth by various governing bodies, including FINRA. Thus, combining both the necessity for a written sales contract and the requirement for broker-dealer registration creates a comprehensive framework that governs the sale of variable annuity contracts among FINRA member firms. This dual requirement demonstrates a commitment to regulatory compliance and emphasizes the importance of maintaining high industry standards.