LIFE, ANNUITY, AND RETIREMENT SOLUTIONS INDUSTRY Volume IV, December 2019 ®

EXPECTLEGAL ISSUES AND DEVELOPMENTS FROM CARLTONFOCUS FIELDS RESETTING THE RULES

A FAST START FOR THE NEW DECADE vIV INSIDE

5 Round and Round – Will 2020 Bring the End to Inconsistent Anti-Rebating Prohibitions?

3 Innovation and Technology 11 Life Insurance That 18 Third Circuit Application at the NAIC 2019 Fall Benefits the Living of Certified Questions Meeting Confirms STOLI Policies 12 SEC Pressures Advisers on Void in New Jersey 4 FSOC: “Too Big to Fail” Has Undisclosed Conflicts Failed 19 No Saving Grace for 14 Reg BI Compliance Policyholders 5 Round and Round – Will Countdown: T-Minus Six 2020 Bring the End to Months 20 The Risk and Reward of Inconsistent Anti-Rebating Life Insurance 15 Clarity on Application Prohibitions? of California Usury Law: 21 Not So Fast: Court 6 Insurance Company Insurers Not Subject Upholds Denial of Request High-Yield Real Estate to Compound Interest for Accelerated Life Investments Limitations Insurance Payment 7 OCIE Risk Alert Highlights 16 Second Circuit Opens 22 News & Notes Compliance Program Door to Lawsuits Based on Catch-22 Contract Violating 1940 Act 8 NAIC Life Insurance and Annuities (A) Committee 17 2019 Year-End Class Action Ends 2019 With a Big Bang Roundup

® EXPECTFOCUS LIFE, ANNUITY, AND RETIREMENT SOLUTIONS DECEMBER 2019

Executive Editor Tom Lauerman The content of EXPECTFOCUS® is for informational purposes only and is not legal ® Assistant Editors Stephanie Fichera advice or opinion. EXPECTFOCUS does not create an attorney-client relationship with Carlton Fields or any of its lawyers. Todd Fuller Production Manager Jessica Bennett SUBSCRIPTIONS: Changes in address or requests for subscription information should be submitted to: Emily LaCount, [email protected]. Production Coordinator Emily LaCount Art Director & Designer Frances Liebold Copyright © 2020 Carlton Fields. All rights reserved. No part of this publication may be reproduced by any means, electronic EXPECTFOCUS® is a quarterly review of or mechanical, including photocopying, imaging, facsimile developments in the insurance and financial transmission, recording, or through any information storage and services industry, provided on a complimentary retrieval system, without permission in writing from Carlton Fields. basis to clients and friends of Carlton Fields. EXPECTFOCUS® is a registered trademark of Carlton Fields.

2 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Innovation and Technology at the NAIC 2019 Fall Meeting BY ANN BLACK AND JAMIE BIGAYER Several NAIC groups continued addressing issues related to innovation in the life insurance industry as follows: y PRIVACY PROTECTIONS WORKING GROUP – is determining whether the NAIC Insurance Information and Privacy Protection Model Act (#670) and the Privacy of Consumer Financial and Health Information Regulation (#672) need to be revised, as a result of the increased use of consumer data, to address any gaps in the current regulatory framework. Initially, the group compared the existing NAIC models against the California Consumer Privacy Act as an example. It also discussed insurers’ reliance on third parties and the insurers’ responsibility to ensure that third parties comply with applicable laws and use accurate data in their determinations. y ACCELERATED UNDERWRITING WORKING GROUP – is obtaining information on, and is assessing issues that may arise out of, life insurers’ use of accelerated underwriting. It will evaluate the issues and determine whether it should draft guidance for the states. y ARTIFICIAL INTELLIGENCE WORKING GROUP – is drafting guiding principles for the use of artificial intelligence in insurance for use by the various NAIC groups, state regulators, and the insurance industry. The draft principles, which are based on the OECD Principles on Artificial Intelligence that seek to promote innovation while protecting privacy and transparency and preventing discrimination, are being tailored for the insurance industry. y BIG DATA WORKING GROUP – concluded that regulators have adequate authority under existing insurance laws and regulations to review insurers’ use of data and algorithms, including as provided by third-party vendors. It discussed whether third-party vendors should be subject to regulatory authority through FCRA-like regulation or requiring that third-party vendors be licensed as advisory organizations.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 3 FSOC: “Too Big to Fail” Has Failed Insurance and Investment Firms Breathe Easier

BY TOM LAUERMAN On December 4, 2019, the Financial Stability Oversight Council adopted final interpretive guidance on addressing systemic threats to the financial system that prioritizes the identification and regulation of risky “activities” rather than risky companies.

Pursuant to the Dodd-Frank Act, the Based on such considerations, the regulators, the SEC, the CFTC, etc. — will FSOC initially adopted standards for FSOC has, for a number of years, been be better able than the Federal Reserve designating systemically important placing more emphasis on (a) identifying Board to tailor appropriate constraints nonbank financial institutions activities that pose significant on that institution’s risky activities. (SIFIs) that relied heavily on the risks to the financial system and (b) size of the institution, among other appropriately addressing such risks For that and other reasons, insurance considerations. SIFIs — often referred across a spectrum of different-sized companies and money managers to as “too big to fail” — are deemed companies engaged in those activities, have generally welcomed the FSOC’s to expose the U.S. financial system rather than seeking to assign the SIFI migration away from “too big to fail” to such significant risks that, under label to individual companies that, by that has now culminated in the final Dodd-Frank, they are subjected to themselves, pose systemic risks. The interpretive guidance; and the FSOC has special prudential regulation by the FSOC’s December 4 final interpretive not recently designated any such firms Federal Reserve Board. guidance is the most recent and as SIFIs. Nevertheless, if the FSOC does definitive articulation of this approach. not believe that measures imposed by Following Dodd-Frank’s enactment, an institution’s primary regulators can very large insurance, mutual fund, and Under the final interpretive guidance, or do adequately address systemic money management firms (among the FSOC will, among other things, give risks presented by that institution, the others) were concerned that they might priority to identifying activities that FSOC and the Federal Reserve Board be designated as SIFIs, and several large present systemic risks and seeking still retain a variety of other remedial insurance companies did in fact receive to adequately control those risks by options, including, in appropriate such designations. The prudential making nonbinding recommendations cases, designating and regulating the regulation to which these insurance to the primary regulators of the institution as a SIFI. companies were subjected proved companies engaged in those activities. burdensome and arguably unnecessary, It is hoped that an institution’s primary given the nature of their activities and regulators — e.g., state insurance the state insurance and other regulation to which they already were subject.

4 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Round and Round – Will 2020 Bring the End to Inconsistent Anti-Rebating Prohibitions? BY ANN BLACK AND JAMIE BIGAYER Since mid-2018, the NAIC’s Innovation and Technology (EX) Task Force (Innovation TF) has been considering how state anti-rebating laws impede insurers and producers’ ability to offer innovative products and services to insureds. Innovation TF members sought to develop guidance or bulletins that would permit insurers and producers to provide “value-added” products and services. During 2019, the Innovation TF worked on language for a template bulletin as a potential alternative to revising the NAIC’s model Unfair Trade Practices Act (Model #880).

The Innovation TF initially worked on requirements. For example, Alabama To increase the likelihood of uniformity draft guidance that would allow for also requires that the insurer be able among the states, the drafting value-added products and services to discontinue the service at any time. group would also need to consider to be offered to consumers. However, West Virginia requires the product or the Rebate Reform Model Act as the Innovation TF went round services to be “clearly identified and developed by the Financial Services and round in the drafting process, it included in the policy.” and Multi-Lines Issues Committee discovered that the interpretation of the National Council of Insurance and implementation of Model 880 As a result of the variations, the Legislators. Hopefully, the Innovation was inconsistent among the several Innovation TF agreed at the NAIC’s Fall TF will be able to develop revisions to states. Adding to the complexity, National Meeting to abandon work on Model 880 during 2020 that will be while the Innovation TF worked on a template bulletin. Rather, to obtain quickly adopted by the states to end the draft bulletin, Alabama, Arizona, more consistency across the states, the inconsistent anti-rebating prohibitions. Connecticut, Florida, Massachusetts, Innovation TF decided to draft Model Missouri, New Hampshire, New York, 880 language to allow for providing North Dakota, Ohio, Pennsylvania, value-added products and services. South Carolina, Washington, and In 2020, a small drafting group will West Virginia have either proposed review draft language submitted by the or adopted new legislation, rules, or American Property Casualty Insurance bulletins addressing their states’ anti- Association and comments and rebating prohibition. presentations received during 2019 and work on language for Model 880. While most of the new or proposed provisions would permit products or services that “mitigate,” “minimize,” or “assess” the insured “risk” or “loss,” some states provided for additional products or services such as “education” or “servicing.” In addition, some states imposed additional

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 5 Insurance Company High-Yield Real Estate Investments The Value Outside Counsel Can Contribute

BY FRANK APPICELLI The insurance industry has played a significant role in the commercial real estate (CRE) market for more than a century. A major part of CRE investments for insurance companies has been commercial mortgage loans, traditionally consisting of first-lien, low-leveraged loans for stable properties. Before the 2008 downturn, insurance companies expanded into mezzanine financing, “B” notes, and junior loan participations. However, after 2008, many insurance companies pulled back from such nontraditional investments and returned to their roots in low-leveraged first-lien mortgage loans.

The last 10 years has been a period of unprecedented low interest rates. While experience have dwindled as investment the CRE market has not been immune to this, CRE investments have provided an and legal professionals moved into opportunity to achieve higher yields than other sectors. During this same period, other areas or retired. Second, the legal real estate values have rebounded to their pre-2008 heights. These factors have and market considerations for these made the CRE lending market more attractive to insurance companies and have led investments have changed considerably to increased investment portfolio allocations to CRE. However, these same factors in the last decade, which makes earlier have also led to increased competition in the CRE lending market with CMBS loan institutional knowledge stale. Third, originators, government agencies, commercial banks, and debt funds. by their very nature higher-yielding investments carry more risk and In the face of this continuing low interest rate environment, more money to invest, thus require careful underwriting and and greater competition to win deals, insurance companies have searched for execution. Despite these challenges, higher-yielding debt investments in less crowded areas. These investments have many insurance companies have been taken the form of: venturing back into the high-yield CRE investment market. y Mezzanine and other high-yield structured financings y “Participating” mortgage loans (i.e., loans with returns tied to asset appreciation In conventional CRE mortgages, low or cash flow) leverage with a hefty equity cushion can provide a comfortable degree y Construction loans of protection against risks, such as y “B” notes unexpected environmental or property y Junior loan participations condition deficiencies or a sluggish y Preferred equity (sometimes with features resembling debt) leasing market. However, in higher- yielding and higher-risk investments, y Joint ventures the insurance company may be an equity investor or a junior debt holder, all Having been active in the CRE market for more than 25 years, we have witnessed much closer to the first-loss position. close hand the changes in the investment activity of our insurance company clients. With many clients having retreated from riskier and higher-yielding CRE Outside legal counsel can provide investments 10 years ago, it is not a simple process for them to pivot back into substantial value to insurance this area for a number of reasons. First, in-house professional knowledge and companies in addressing the challenges of high-yield CRE investing, especially in the following areas:

y Finance and equity transactional expertise – the legal documents will still comprise the backbone of the transaction. Expertise in collateral, intercreditor, and other documentation issues is essential.

6 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM OCIE Risk Alert Highlights Compliance Program Catch-22 BY TOM LAUERMAN A risk alert issued on November 7, 2019, by the SEC’s Office of y Environmental – a solid and practical understanding of Compliance Inspections and Examinations underscores a continuing environmental issues remains dilemma faced by SEC-regulated entities. an important specialty in both conventional mortgage loans The risk alert undertakes to summarize the “most often cited deficiencies and and high-yield investments. weaknesses that the staff has observed in recent examinations of registered investment companies.” Many of the summarized deficiencies involve failures y Tax – while not an issue in debt to adhere to the various types of compliance policies and procedures that the transactions, tax counsel is registrants have adopted — even in cases in which the failure did not result in critical in private equity and joint whatever type of legal violation the procedures might have been designed to venture transactions. prevent. OCIE’s tendency to cite failure to adhere to compliance policies and procedures y Construction – construction as a discrete compliance deficiency naturally incentivizes registrants to limit the expertise is a must-have skill in scope and detail of their compliance policies and procedures as much as possible, construction loans and equity consistent with being reasonably designed to prevent violations of relevant legal investments involving new requirements. construction or redevelopment. However, attempts to pare back on any arguably superfluous compliance policy y Leasing – knowledgeable and procedure provisions also risk incurring OCIE’s ire. Indeed, the preponderance leasing counsel is desirable in of the risk alert summarizes numerous areas in which the staff seems ready to equity investments in which the second-guess registrant judgments that more detail is unnecessary in compliance investor is closer to operational policies and procedures, even if no other legal violation has resulted. matters. It can be appropriate for some compliance policies and procedures to be quite y Creditors’ rights and litigation general in nature — e.g., simply assigning to a particular person responsibility for – while no institution enters an compliance with a given legal requirement, perhaps specifying some key principles investment expecting it to fail, for that person to follow. To ensure compliance with other legal requirements, one must always be prepared however, it may be necessary or advisable to adopt a more prescriptive approach for that possibility in high-yield that specifies in some detail what steps the responsible personnel are to take. riskier investments. The process of crafting compliance policies and procedures, therefore, In our experience, it is highly necessarily involves difficult judgment calls, and the Risk Alert makes clear that desirable that outside counsel for registrants will not be immune from OCIE criticism after the fact, regardless of a high-yield investment platform what approach they take. This doubtless also applies to registered broker-dealers provide a multidisciplinary team and investment advisers, although the risk alert by its terms only covers mutual of lawyers who can address the funds, insurance company separate accounts, and other registered investment various legal areas involved in such companies. investments. As one of the few firms that offer an integrated team of such lawyers who represent insurance companies in the full spectrum of CRE transactions, we will continue to report on issues and developments in this area.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 7 NAIC Life Insurance and Annuities (A) Committee Ends 2019 With a Big Bang BY ANN BLACK AND JAMIE BIGAYER On December 30, 2019, the Life Insurance and Annuities (A) Committee approved a revised Suitability in Annuity Transactions Model Regulation (Revised Suitability Model), ending a flurry of activity over the past year. The Revised Suitability Model must be approved by all voting members of the NAIC and then adopted by individual states before it will apply to annuity transactions. Commissioner Ommen, chair of the committee, explained that the Revised Suitability Model aligns the state standard of conduct with the SEC’s Regulation Best Interest and provides more than suitability but does not impose a fiduciary standard.

In with the new year is a best interest standard of care that comprises four components: y Care Obligation y Conflict of Interest Obligation y Disclosure Obligation y Documentation Obligation

Invited to the gala are all producers who have “exercised material control or influence in the making of a recommendation and ha[ve] received direct compensation as a result of the recommendation or sale, regardless of whether the producer has had any direct contact with the consumer.” These producers are subject to the Revised Suitability Model requirements, in recognition that a producer with the consumer relationship may consult with another producer who provides the recommendation.

The Revised Suitability Model enhances the requirement that insurers establish and maintain a supervision system reasonably designed to achieve compliance with the Revised Suitability Model. It also invites other “comparable standards” as safe harbors that are deemed to satisfy the requirements of the Revised Suitability Model.

Below is a summary of the four component obligations, the insurers’ supervision requirement, the safe harbor, and certain notable items. Care Obligation product, as evaluated in light of the consumer profile information; and Items of Note: The Care Obligation requires four acts, y The importance of the factors exercised with reasonable diligence, 4. Communicate the basis or bases of relevant in determining care, and skill, as follows: the recommendation. whether an annuity effectively addresses a consumer's 1. Know the consumer’s financial The Care Obligation contains 10 financial situation may vary situation, insurance needs, and additional provisions explaining what is, based on the facts and financial objectives; and what is not, required to satisfy these circumstances of a particular four acts. In general, the producer must case. 2. Understand the available consider the totality of the consumer's recommendation options after information — which the producer has y The recommendation does not making a reasonable inquiry into made reasonable efforts to obtain — have to be the annuity with the available options; against the totality of the products lowest one-time or multiple available to be sold by the producer, occurrence compensation 3. Have a reasonable basis to and must conclude that the annuity structure. believe the recommended effectively addresses the consumer’s option effectively addresses the financial situation, insurance needs, consumer’s financial situation, and financial objectives, and that the insurance needs, and financial consumer would benefit from certain objectives over the life of the features of the annuity.

8 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Disclosure Obligation 3. Prior to or at the time of the recommendation, disclosure of the The Disclosure Obligation sets forth three disclosure requirements: various features of the annuity.

1. Prior to any recommendation, an "Insurance Agent (Producer) Disclosure for Annuities" form setting forth: Items of Note: y The Insurance Agent ƒ The scope and terms of the producer's relationship with the consumer and (Producer) Disclosure must be the producer's role in the transaction. provided at the outset of the ƒ The products the producer is licensed and authorized to sell. relationship so the consumer ƒ The insurers for whom the producer may sell products. can decide whether to provide ƒ The sources and types of cash and non-cash compensation to be received his or her information. by the producer and from whom the producer will receive the compensation. y To ensure the consumer ƒ Notice of the consumer's right to request more information on the cash receives the disclosure, the compensation to be received. signature page should not appear on a separate page. 2. If requested by the consumer or the consumer's designated representative, a reasonable estimate of the cash compensation to be received and whether the compensation amount is a one-time or multiple occurrence amount.

Conflict of Interest Obligation Items of Note: The Conflict of Interest Obligation requires a producer to: y "Material conflict of interest" means a financial interest of the producer in the sale of an annuity 1. identify, and that a reasonable person would expect to influence 2. either: the impartiality of a recommendation, but does a. avoid, or not include cash compensation or non-cash b. reasonably manage and disclose compensation. material conflicts of interest, including material conflicts of y Insurers are required to eliminate sales contests, interest related to an ownership interest. sales quotas, and bonuses that are based on the sales of specific annuities within a limited period of time. In addition, as part of the Best Interest Obligation, in making a recommendation, a producer must act without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 9 Documentation Obligation Items of Note: The Documentation Obligation varies, as follows: y Even if a transaction is not based on a recommendation, an insurer's issuance y If a recommendation was made – the producer must make a written of the annuity must be reasonable under record of any recommendation and the basis for the recommendation. all circumstances actually known to the insurer at the time the annuity is issued. y If the consumer refused to provide some or all of the consumer's information – a signed "Consumer Refusal to Provide Information" form y Insurers must establish and maintain at the time of the sale. reasonable procedures to identify and address suspicious consumer refusals to y If the consumer purchased an annuity that was not recommended – a provide consumer profile information. signed "Consumer Decision to Purchase an Annuity NOT Based on a Recommendation" form at the time of the sale. Insurer Supervision Safe Harbor

The insurer supervision requirements Under the Revised Suitability Model, the safe harbor was expanded beyond were enhanced by requiring insurers compliance with FINRA's suitability and supervision requirements. The safe to establish and maintain reasonable harbor applies to "all recommendations and sales of annuities made by financial procedures in three additional areas: professionals in compliance with business rules, controls and procedures that satisfy a comparable standard even if such standard would not otherwise apply 1. To assess whether a producer to the product or recommendation at issue." The financial professionals that fall has provided to the consumer the within the safe harbor are: information required by the Revised Suitability Model. y A registered broker-dealer or a registered representative of a broker-dealer; 2. To identify and address suspicious y A registered investment adviser or an investment adviser representative consumer refusals to provide associated with the registered investment adviser; or consumer profile information. y Specified plan fiduciaries under the Employee Retirement Income Security Act 3. To identify and eliminate any sales of 1974 or the Internal Revenue Code. contests, sales quotas, bonuses, and non-cash compensation that The Revised Suitability Model notes that each state must determine whether are based on the sales of specific to extend the safe harbor to state-registered broker-dealers and investment annuities within a limited period of advisers. time. While the safe harbor applies, an insurer is still obligated not to issue an annuity The Revised Suitability Model also unless there is a reasonable basis to believe the annuity would effectively address makes clear that the insurer's system the particular consumer's financial situation, insurance needs, and financial of supervision does not need to include objectives. The NAIC Executive Committee and Plenary will consider the adoption a "comparison to options available to of the Revised Suitability Model on February 13, 2020. the producer or compensation relating to those options other than annuities or Now that the festivities are complete, it is time for insurers to start considering other products offered by the insurer." their New Year's resolutions to modify their existing policies and procedures for the new requirements of the Revised Suitability Model.

10 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Life Insurance That Benefits the Living BY ANN BLACK AND MEGAN DHILLON For decades, life insurance has been viewed as just providing benefits to those named as the beneficiary. As we enter the new decade, insurers are changing this narrative. Insurers are looking to offer insureds a range of value-added products and services with the life insurance products as well as benefit riders that permit insureds to receive part of the death benefit or take loans from their policies allowing them to use the proceeds to improve their life. Insurers are developing programs To the extent that access to health providers is made available, these programs under which insureds are given may involve the provision of health care services. Thus, a life insurer must consider access to health care apps, devices, whether the value-added services are viewed as a form of health insurance such as smartwatches or smart under state law. States vary in their definitions of health insurance, but a policy speakers, and telemedicine services, that provides medical benefits in exchange for a premium could be considered which allow beneficiaries to manage health insurance. Life insurance companies would then need to comply with the chronic medical conditions, track requirements pertaining to health insurers. Those additional requirements would their medication, be more active, and add numerous regulatory challenges and burdens for life insurers. maintain healthy lifestyles. However, while these products and services However, to avoid classification as a health insurer, life insurance companies can be valuable to both insurers and can structure health services programs under statutory protections afforded to insureds, life insurers have to consider concierge medicine practices. Concierge medicine practices, which allow patients several legal issues when structuring to directly contract with health care practitioners for the provision of health care these programs. services in exchange for an annual or periodic fee, are specifically exempt from the definition of health insurance in numerous states. y Will the value-added product or service run afoul of state anti- rebating prohibitions? y Do your partners have appropriate safeguards and policies to protect the insureds' information?

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 11 SEC Pressures Advisers on Undisclosed Conflicts BY EDMUND ZAHAREWICZ “We are actively looking for circumstances where an adviser is financially conflicted by incentives that could affect investment recommendations to clients. ... And I will tell you: the more we look, the more undisclosed or inadequately disclosed financial conflicts we find.”

Those ominous words were part of SEC Division of Enforcement Co-Director Stephanie Avakian’s keynote remarks at a November securities regulation conference. While her remarks focused on the investment advisory space, Avakian made clear that the division’s interest in identifying and addressing undisclosed conflicts applies “across the securities markets.”

Share Class Self-Reporting Initiative suggest, it would not be surprising to see the division launch additional self-reporting initiatives like the share class As an example of the type of conflicts she was talking about, selection initiative. Avakian referred to the division’s recent share class selection disclosure self-reporting initiative, which was designed Other Types of Conflicts in SEC Crosshairs to identify and address harm resulting from undisclosed conflicts of interest in the selection of mutual fund shares by According to Avakian, the division is also actively looking investment advisers. The initiative resulted in 95 enforcement for and finding undisclosed conflicts in other areas. actions against firms that had the choice of investing their These include: clients’ money in different classes of the same investment and chose the more expensive option without fully disclosing y Revenue-sharing arrangements in which a clearing broker that this option paid the firm additional compensation. These pays a portion of the fees it charges mutual funds for settled actions ordered the return of more than $135 million access to its platform to (a) an investment adviser that to investors and required that the advisers’ practices be is also registered as a broker-dealer (a “dually registered reflected in their disclosures to clients. adviser”) or (b) an adviser’s affiliated introducing broker-dealer. While these actions represent a small fraction of the overall registered adviser population, Avakian’s remarks also suggest y Cash sweep arrangements in which a dually registered that at least some advisers were able to avoid the types of adviser or an adviser’s affiliated broker-dealer may receive disclosure failures seen in these cases by having fulsome additional compensation for recommending one cash disclosure, choosing not to take 12b-1 fees, rebating fees or investment over another. crediting fees back to clients, or recommending the lower- cost share class. y Bank deposit cash sweep programs in which a bank or the bank’s affiliated clearing broker pays a portion of the If the division is truly discovering widespread deficiencies revenue the bank earns on investor deposits to a dually in conflicts disclosures, as Avakian’s remarks seem to registered adviser or an adviser’s affiliated broker-dealer.

12 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM y Unit investment trusts that are sold with one fee structure Among other things, the FAQ remind advisers of their for broker-dealer customers and another for investors who general disclosure obligations and the specific disclosure will hold the UIT in a fee-based advisory account, where a requirements in Form ADV. When such a conflict exists, for dually registered adviser or an adviser’s affiliated broker- example, an adviser must disclose how the adviser addresses dealer may generate more revenue by recommending UIT the conflict and include in the adviser’s disclosure “sufficiently interests with one fee structure over the other. specific facts” to allow clients to understand the conflict and the adviser’s business practices and give informed consent or Section 403(b) Plan Initiative reject them. An adviser’s fiduciary duty may also require the adviser to make disclosures to clients that are in addition to Avakian also noted that, as part of an agencywide initiative, those required in Form ADV. the division is looking at the administration of teacher retirement plans (i.e., “403(b) plans”) as another area in which Elimination or Mitigation of Conflicts there may be undisclosed conflicts. In particular, as has been widely reported, the division is looking at the compensation The SEC staff’s current aggressive initiative against and sales practices of the plans’ third-party administrators, undisclosed conflicts, coupled with the staff’s public as well as the practices of their affiliated advisers and broker- articulation of the fiduciary standards and specific dealers. requirements that conflicts disclosures must meet, may push advisers to favor business models that eliminate, or at least Avakian was careful to specify certain things the division is mitigate, conflicts over models that rely on the disclosure not doing. In particular, she made clear that the division is not of conflicts alone. Indeed, the SEC staff may be seeking making value judgments on financial incentives, the scope of that result, as it would tend to harmonize the practices of services provided, or the fees charged to investors. Rather, investment advisers with those of broker-dealers under the division is looking only at issues that “may directly affect Regulation Best Interest, which is now looming on the horizon. an investor’s return on an investment.” In contrast to advisers, broker-dealers recommending FAQ on Adviser Compensation Disclosure securities transactions will be required by Reg BI to adopt business models that eliminate or at a minimum mitigate Avakian’s remarks followed by several weeks — and beat the specified types of conflicts, and dually registered advisers same drum as — “Frequently Asked Questions Regarding may be hard pressed not to operate under the higher Reg BI Disclosure of Certain Financial Conflicts Related to standard. As for other advisers, it remains to be seen what Investment Adviser Compensation” published by the staff of impact Reg BI and the current spotlight on undisclosed the Division of Investment Management. The FAQ represent conflicts will have on their business practices going forward. the staff’s view regarding the disclosure obligations of What is certain, however, is that advisers and broker-dealers advisers with respect to conflicts of interest that result when should be proactive in evaluating potential conflicts and an adviser receives compensation, directly or indirectly, in assessing disclosures in light of their current practices and connection with the investments the adviser recommends. changing regulatory and business landscapes.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 13 Reg BI Compliance Countdown: T-Minus Six Months BY ANN FURMAN As the June 30, 2020, compliance date approaches, broker-dealers are taking steps to implement Regulation Best Interest (Reg BI), which establishes a new standard of conduct when making recommendations to retail customers of any securities transaction or investment strategy involving securities. The new rule requires additional disclosures, policies and procedures, conflict identification, and training beyond what broker-dealers have previously had in place.

Reg BI compliance steps specifically CRS also clarify relationship summary In addition, the SEC staff has include: identifying potential conflicts delivery scenarios. Another resource announced that, prior to the June 30 of interest; assessing reasonably available on the SEC’s website is compliance date, it will engage with available alternative recommendations; a publication titled “A Small Entity broker-dealers during examinations reviewing, revising, and adding conflict Compliance Guide” that addresses on their progress in implementing the disclosure; drafting a relationship Reg BI obligations, concepts, and new rules and questions they may summary (on new Form CRS); terms of art. have regarding the new rules. Again, amending and developing supervisory however, the staff has characterized procedures to identify and address Subsequently, the SEC staff has this pre-June 30 engagement with conflicts of interest; and training issued “Frequently Asked Questions broker-dealers as being to “further associated persons to assure that each on Regulation Best Interest.” This assist” firms, rather than to find fault recommendation they make is in a document is divided into four with them. retail customer’s best interest. sections, each of which provides additional guidance on an important Guidance From FINRA The SEC and FINRA each have issued aspect of the regulation: online guidance to assist broker- For its part, FINRA published a “Reg dealers in implementing their Reg BI y The concept of a “recommendation” BI and Form CRS Firm Checklist” that compliance obligations. The regulators sets forth 20 multipart steps to achieve appear to be working together to avoid y The disclosure obligation Reg BI compliance and eight multipart duplication and achieve consistency in steps to achieve Form CRS compliance guidance. y The care obligation that is part of as prescribed in the SEC adopting the standard of conduct releases. FINRA’s checklist identifies Guidance From the SEC key differences between current y The conflict of interest obligation FINRA rules and SEC Reg BI and Form The SEC staff, for example, issued CRS. FINRA also has established a “Frequently Asked Questions on In order to assist firms with planning Reg BI webpage containing various Form CRS” clarifying that each for compliance with the new rules, compliance resources. broker-dealer and investment adviser the SEC also has established is to prepare only one relationship an inter-Divisional Standards of Finally, in its January 9 “Risk Monitoring summary of “all of the principal Conduct Implementation Committee, and Examination Priorities Letter,” relationships and services it offers” to and the SEC encourages firms to FINRA noted that, in the first retail investors no matter how many actively engage with this committee part of 2020, it will review firms’ different services are offered to retail as questions arise in planning preparedness for Reg BI to understand investors. The SEC staff FAQ on Form for implementation. Firms can implementation challenges. After send their questions by email to the June 30 compliance date, FINRA [email protected]. intends to examine firms’ compliance with Reg BI, Form CRS, and related SEC guidance. In this regard, FINRA announced in the 2020 priorities letter that it may take into consideration the

14 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Clarity on Application of California Usury Law: following factors when reviewing a Insurers Not Subject firm for Reg BI compliance: to Compound Interest y Does a firm have procedures and training in place to assess Limitations recommendations using a best BY TODD FULLER AND interest standard? STEPHANIE FICHERA y Does a firm and its associated persons apply a best interest The California Supreme Court standard to recommendations of recently handed Northwestern types of accounts? Mutual Life Insurance Co. a y If a firm and its associated decisive victory in a putative persons agree to provide class action challenging the insurer’s account monitoring, do they apply the best interest standard assessment of compound interest on to both explicit and implicit hold policy loans, holding that insurers are not subject to the recommendations? compound interest limitations of California’s usury laws. y Does a firm and its associated persons consider the express new Answering a question from the Ninth Circuit Court of Appeals in Wishnev v. elements of care, skill, and costs Northwestern Mutual Life Insurance Co., the California Supreme Court when making recommendations to unanimously ruled that insurers are exempt from a century-old voter initiative, retail customers? which requires lenders to obtain borrowers’ signed consent before compound interest can be charged on loans. y Does a firm and its associated persons consider reasonably The 1918 voter initiative was designed to provide a uniform approach to the available alternatives to the maximum allowable interest rate applicable to all loans and lenders. Among other recommendation? things, the 1918 initiative provides that interest may not be compounded “unless y Does a firm and its registered an agreement to that effect is clearly expressed in writing and signed by the party representatives guard against to be charged therewith.” In 1934, the voters amended the California Constitution excessive trading, irrespective to address interest rates and exempt certain lenders from these restrictions. of whether the broker-dealer or As a result, specified lenders, including insurers licensed to do business in the associated person “controls” the state, were now exempt from the interest rate limitations. The 1934 amendment, account? however, made no mention of compounding interest. Thus, the question for the y Does a firm have policies and California Supreme Court was whether these exempt lenders remained subject to procedures to provide the the 1918 initiative’s compound interest restrictions. disclosures required by Reg BI? y Does a firm have policies and The court noted that these laws were “far from a model of clarity,” and the procedures to identify and “interplay among these sources continues to generate confusion.” However, address conflicts of interest? after a lengthy discussion of the history of the 1918 initiative, voter-approved constitutional amendments, and various “statutes scattered throughout y Does a firm have policies and various codes regulating lenders considered exempt,” the court concluded that procedures in place regarding the “the 1934 amendment impliedly repealed the compound interest limitation as filing, updating, and delivery of to exempt lenders,” like Northwestern Mutual. The court cautioned that “[t]his Form CRS? conclusion does not mean exempt lenders may charge compound interest without a contractual or legal basis to do so,” but “simply means they are not By attending as soon as possible subject to statutory liability and penalties otherwise imposed by the 1918 to the numerous and complex initiative on nonexempt lenders.” preparations required for blastoff, broker-dealers can greatly reduce the possibility of fizzling out on the launch pad when the clock hits zero.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 15 Second Circuit Opens Door to Lawsuits Based on Contract Violating 1940 Act BY GARY COHEN The Second Circuit has decided that Section 47(b) of the Investment Company Act of 1940 provides a private right of action for rescission of a contract that violates any provision of the 1940 Act or any rule or order thereunder. The decision was handed down in Oxford University Bank v. Lansuppe Feeder LLC last August.

The Oxford decision conflicts with a Third Circuit decision in Santomenno v. At first blush, the Oxford decision may John Hancock Life Insurance Co. in 2012. The Oxford opinion is thought unlikely seem to have a limited impact because to be appealed to the U.S. Supreme Court, which could resolve the conflict only a party to a contract can bring an between circuits. Until such resolution, contract parties would have the right to action to rescind it, and investment sue under Section 47(b) at least in the financially savvy Second Circuit. company shareholders are not parties to many contracts involving investment Section 47(b), under the Second Circuit’s decision, provides for rescission of a companies. contact “by either party” when the contract “is made, or whose performance involves, a violation” of the 1940 Act or “any rule, regulation, or order However, the Ninth Circuit, in Northstar thereunder.” The section provides that “a court may not deny rescission at the Financial Advisors Inc. v. Schwab instance of any party unless such court finds that under the circumstances the Investments, held that fund shareholders denial of rescission would produce a more equitable result than its grant and could bring a breach of contract action would not be inconsistent with the purposes” of the 1940 Act. The section, under state law against a fund based however, preserves the “lawful portion of a contract to the extent that it may on disclosure in the fund’s prospectus. be severed from the unlawful portion of the contract,” as well as any “recovery Although a subsequent court decision against any person for unjust enrichment.” precluded the claim under the Securities Litigation Uniform Standards Act, the Implied private rights of action under the 1940 Act have a convoluted history. intriguing question arises whether a private right of action would lie under In decades past, courts found implied private rights of action under various Section 47(b) based on disclosure alleged sections of the 1940 Act, most importantly under Section 36(a). However, in to violate the 1940 Act. 2001, the U.S. Supreme Court, in Alexander v. Sandoval, laid down a stringent test for finding implied private rights of action under a statute. This caused In September 2019, the Second Circuit, in courts to put the brakes on finding implied private rights of action generally, Edwards v. Sequoia Fund Inc., purposefully including under the 1940 Act. refused to address the Northstar concept that disclosure can constitute a contract, In Olmsted v. Pruco Life Insurance Co., the SEC filed a brief with the Second but assumed the concept for the purpose Circuit advising that Section 47(b) provided a private right of action. However, of finding against the plaintiff. Technically, the court, in 2002, declined to decide the question. the Second Circuit left standing the district court’s holding that fund disclosure can constitute a contract.

The ramifications of the Oxford decision, for both the investment company and the life insurance company industries, are yet to be sorted out.

16 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 2019 Year-End Class Action Roundup BY IRMA SOLARES Life insurers bid farewell to a fairly moderate year of class action litigation. Although several class actions were filed against life insurers in the last quarter of 2019, the filings were reflective of the litigation trends within the past few years, including challenges to interest crediting under fixed indexed deferred annuities and cost of insurance expenses.

Fixed Indexed Deferred Annuities Cost of Insurance

On opposite sides of the country, two class Plaintiffs also continue to file cases challenging the amounts charged for action suits were filed within weeks of each cost of insurance (COI). New class actions were filed in theMiddle District other challenging fixed indexed deferred of Florida, the Western District of Missouri, and the Western District of annuities. In the U.S. District Court for the Washington. The Florida action asks the court to certify a class of Florida Central District of California, the plaintiff and Texas consumers who had monthly COI charges deducted from their challenged an alleged “fraudulent scheme” policies allegedly in excess of amounts specifically permitted by the terms that consisted of the development and of the policies because the insurer failed to reduce the COI rates to reflect marketing of fixed indexed annuities that the defendant's improving expectations as to future mortality experience. would provide above-market returns through The action alleges common law claims for breach of contract, breach of the uncapped participation in gains within certain covenant of good faith and fair dealing, conversion, and declaratory relief. proprietary indexes. The action sought certification of California and Illinois classes, Similarly, in Missouri, the plaintiff filed suit in state court to carve out a and the complaint asserted violations of Missouri class from a pending nationwide (49-state) putative class action. the California Unfair Competition Law and The defendant insurer removed the action to the Western District of the Illinois Consumer Fraud and Deceptive Missouri. Like the related action already pending in federal court, the new Business Practices Act, and sought rescission suit alleges that the defendant breached its duty to the plaintiff by failing and restitution for common law fraud. The to reduce COI rates to reflect the defendant's improving expectations as to action was short-lived as the plaintiffs filed a future mortality experience. notice of voluntary dismissal just six weeks after filing the complaint. In the Western District of Washington, the plaintiff seeks certification of a nationwide class (excepting policies issued in California and Missouri) and a In the second suit, filed in theSouthern Washington subclass in an action claiming that the defendant uses factors District of Florida, the plaintiff is seeking not authorized by the policies when determining the COI, which results in certification of a nationwide RICO class a higher COI. The plaintiff claims that this practice constitutes breach of action and a Florida unjust enrichment contract, conversion, and violation of the Washington Consumer Protection subclass stemming from purported Act, and seeks declaratory and injunctive relief. misrepresentations concerning the fixed indexed annuities’ participation in certain Much of this type of class action litigation, particularly actions challenging proprietary indexes. index interest crediting under fixed indexed annuities and indexed universal life insurance policies, is certain to continue in 2020.

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 17 Third Circuit Application of Certified Questions Confirms STOLI Policies Void in New Jersey BY BROOKE PATTERSON We previously reported on the New Jersey Supreme Court’s ruling on the validity of stranger-originated life insurance (STOLI) policies in the June 2019 issue of Expect Focus — Life, Annuity, and Retirement Solutions. In Sun Life Assurance Company of Canada v. Wells Fargo Bank, N.A., a federal trial court originally concluded that a $5 million policy taken out on the life of Nancy Bergman, which had a trust as owner and beneficiary and which was eventually sold by investors to Wells Fargo, violated New Jersey’s statutory requirement that the policyholder have an insurable interest in the life of the insured. The Third Circuit Court of Appeals ultimately certified two questions to the New Jersey Supreme Court:

1. Whether STOLI policies violate the The New Jersey Supreme Court Based on the New Jersey Supreme public policy of New Jersey and are answered the first question in the Court’s answers to its certified thereby void ab initio; and affirmative, finding that policies questions, the Third Circuit recently procured with the intent to benefit affirmed the district court’s finding 2. If the policy is void, is a later persons without an insurable interest that the Bergman policy violated New purchaser, who was not initially in the life of the insured violate public Jersey public policy. The Third Circuit involved, entitled to a refund of policy and are void ab initio. In response held that the policy was procured with premium payments? to the second question, the court held the intent of benefiting the investors in that, depending on the circumstances, the policy rather than anyone with an a party may be entitled to a refund insurable interest in Bergman’s life. The of premiums paid on a void STOLI Third Circuit also agreed that allowing policy, particularly in the case of a later Sun Life to keep Wells Fargo’s premium innocent purchaser of the policy. payments would be a windfall, as Wells Fargo was a later innocent purchaser of the policy and had no knowledge of the STOLI arrangement.

18 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM No Saving Grace for Policyholders BY ELISE HAVERMAN In McHugh v. Protective Life Insurance, the California Court of Appeal held that a statute requiring 60-day grace periods for term life insurance policies did not apply retroactively.

The beneficiaries of a term life period of at least 60 days” before and concluded that the legislative insurance policy issued in 2005 the policy can be terminated for history reflected that the legislature’s challenged Protective Life’s termination nonpayment of premium. Affirming the intent was that the new law would of the insured’s policy. The policy was trial court’s judgment, the appellate apply only to those policies “issued or terminated following expiration of court concluded that the statute applies delivered” after January 1, 2013. the policy’s 31-day grace period for prospectively only to term life policies nonpayment of premium. The insured issued after January 1, 2013. Because the term life insurance policy died four months later. The beneficiaries at issue in McHugh was issued and filed suit asserting claims for breach A statute applies retroactively if delivered to the insured in 2005 — of contract and breach of the implied (1) it contains express language of eight years before the statute now in covenant of good faith and fair dealing, retroactivity; or (2) other sources effect — the insured was not entitled arguing that the insurer failed to comply provide a clear and unavoidable to the extended, 60-day grace period. with a newly enacted statute requiring a implication that the legislature 60-day grace period. intended the statute to be retroactive. The McHugh court found no express The California statute requires that language of retroactivity in the statute “all life insurance policies issued or delivered in California on or after [January 1, 2013] … contain a grace

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 19 The Risk and Reward of Life Insurance No Recovery for Paying Premiums in Excess of Policy Face Amount

BY DIMITRIJE CANIC Since we last reported on Goostree v. Liberty National Life Insurance Co. in the October 2019 issue of Expect Focus — Life, Annuity, and Retirement Solutions, the court granted the defendant’s motion to dismiss all counts of the plaintiffs’ complaint.

The plaintiffs alleged that the gambles that the insured will live the insured subsidizes the increased insurer targeted undereducated and long enough so that the company can risk that comes from the insurance unsophisticated consumers to induce collect premiums sufficient to cover company’s younger clients, who may them to buy insurance policies it knew the amount of the policy and potentially die before they pay sufficient premiums required premiums that would exceed more. The insured gambles that he or to cover the face amount. “For both the face amount of the policies. The she will not outlive the “break-even parties, life insurance is a gamble,” plaintiffs asserted various individual point” for the insurance companies. the court noted. The court concluded and class action claims for, inter alia, that the plaintiffs could not now allege breach of contract; breach of the Here, the court concluded that the a cause of action merely because implied covenant of good faith and fair plaintiffs gambled and lost, holding they lost their “bet” and lived well into dealing; conversion; unjust enrichment; that the plaintiffs could not allege their 80s, still paying premiums on and negligence. wrongdoing simply because they paid their policies. The court, accordingly, more premiums than the face amount dismissed the case in its entirety with The court concluded that each of of their policies. As the court explained, prejudice. the plaintiffs’ claims was deficient. the insurance company assumes an Rather than pleading any cognizable increased risk in the early years of claims, each count merely highlighted a life insurance policy so that, as an the nature of life insurance, which insured ages past the break-even point, the court described as “a gamble” for both parties. The insurance company

20 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM Not So Fast: Court Upholds Denial of Request for Accelerated Life Insurance Payment BY BROOKE PATTERSON The Ninth Circuit recently affirmed a summary judgment ruling in favor of Minnesota Life Insurance Co. on all claims stemming from its denial of an accelerated life insurance payment.

In Bancroft v. Minnesota Life Insurance denied Bancroft’s request. The policy Life’s decision to deny the accelerated Co., Minnesota Life issued a group rider and denial letter gave Bancroft the payment was not unreasonable given term life insurance policy to Bancroft’s right to request mediation or binding the evidence. employer. The policy contained an arbitration, which Bancroft disregarded, accelerated benefits policy rider, which instead filing suit against Minnesota The Ninth Circuit affirmed the trial provided for accelerated payment of Life. The parties filed cross-motions court’s decision. Relying on the medical the full death benefit if the insured for summary judgment on Bancroft’s evidence and especially the testimony had a terminal condition. The policy claims of breach of contract, bad faith, of Bancroft’s own doctor, the Ninth rider defined terminal condition as breach of Washington’s Insurance Fair Circuit held that it was reasonable a condition that directly results in a Conduct Act (IFCA), and breach of the for Minnesota Life to conclude that life expectancy of 24 months or less. Washington Consumer Protection Act Bancroft’s life expectancy exceeded Additionally, the policy rider required (WCPA). 24 months and to deny the accelerated that the insured provide evidence to payment. The Ninth Circuit also show his or her life expectancy. The trial court found that Minnesota emphasized that Washington law Life did not breach the policy rider, as requires an insured to assert his or her Bancroft was diagnosed with lymphoma Bancroft did not provide sufficient right to mediation or arbitration before and requested his accelerated benefit, evidence to support a 24-month proceeding to litigation, which Bancroft providing a statement from his doctor life expectancy, and all the medical failed to do. that his life expectancy was 24 months. testimony in the case, including However, Bancroft’s doctor relied on an Bancroft’s own doctor, agreed that Minnesota Life eventually paid the outdated publication, and Minnesota the life expectancy exceeded 24 accelerated life insurance payment to Life’s medical reviewer determined months. The trial court also found that Bancroft, who provided new information that Bancroft’s life expectancy was 37 even though Bancroft had the right about his life expectancy through court months. Because the medical reviewer to arbitration or mediation, he did not filings, which met the requirement was unable to determine that Bancroft’s invoke that right. Further, the trial court of terminal condition under the life expectancy was 24 months or less granted summary judgment on the accelerated benefits policy rider. with 90% certainty, which was the IFCA and WCPA claims as Minnesota company’s standard, Minnesota Life

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 21 NEWS & NOTES

Carlton Fields financial services Carlton Fields is a sponsor of the third The firm earned national first-tier regulatory attorneys participated in annual American Bar Association rankings in the 2020 U.S. News and the 37th Annual Advanced ALI CLE Current Issues in FINRA Arbitration World Report and Best Lawyers® Conference on Life Insurance Company and Enforcement CLE program on Best Law Firms guide for several Products, held on November 6–8 in February 22 in Fort Lauderdale, practices, including insurance law and Washington, D.C. Several attorneys Florida. The three-panel program securities/capital markets law. The spoke at the conference: covers topics of interest to attorneys firm also received high rankings for and regulatory professionals practicing a multitude of its practices in several y Ann Black led a panel on key trends before FINRA or otherwise working in metropolitan areas. driving sales of fixed and fixed index the securities industry. Shareholder annuities and life insurance products Ann Furman will moderate a panel Carlton Fields welcomes the following and related regulatory developments. on FINRA’s examination findings and attorneys to the firm: Shareholders priorities for 2020. Christina Gagnier (cybersecurity and y Richard Choi co-chaired the two- privacy, Los Angeles) and Rae Vann day conference and co-led a pre- Carlton Fields is hosting a California (labor and employment, Washington, conference introductory workshop Consumer Protection Act (CCPA) D.C.); Of Counsel Steven Anapoell on the regulatory framework for life Forum on March 3 in Los Angeles, (business transactions, Los Angeles), insurance company products and California. The forum will help in-house Simon Gaugush (white collar crime and underlying investments. counsel, chief privacy and information government investigations, Tampa), officers, and C-suite leaders and Richard Tschantz (government y Gary Cohen, appearing at this understand the current landscape of law and consulting, Tampa); and conference for the 36th time, the CCPA, including the status of the Associates Dimitrije Canic (life, annuity, delivered a presentation on practical regulations, anticipated litigation and and retirement litigation, Miami), insights and key takeaways on enforcement priorities, and potential Darnesha Carter (business litigation, important regulatory and litigation changes to the law. Tampa), Chael Clark (property and developments affecting insurance casualty insurance, New York), James dedicated funds and advisers. The firm is a sponsor of the Global Czodli (business litigation, Miami), Insurance Symposium, taking place Brianna Donet (business litigation, y Chip Lunde presented on a panel on April 21–23 in Des Moines, Iowa. Miami), Alexander Hegner (real estate new SEC Regulation Best Interest The conference allows insurance and commercial finance, Atlanta), and related SEC matters. and financial services executives to Scott Menger (business litigation, discover cutting-edge technologies Los Angeles), Luigi Orengo (creditors’ impacting the industry, network with rights and bankruptcy, Tampa), Katelyn regulators and leaders in the field, and Sandoval (securities and derivative gain valuable knowledge. litigation, New York), Michael Shepherd (business litigation, Miami) and Michael Zilber (business litigation, Miami).

22 Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM LIFE, ANNUITY, AND RETIREMENT SOLUTIONS INDUSTRY GROUP

Co-leaders, Ann Y. Black and Markham R. Leventhal

Scott Abeles Brendan N. Gooley Mark A. Neubauer Enrique D. Arana Clifton R. Gruhn Brooke Patterson Jamie B. Bigayer Elise K. Haverman John C. Pitblado Scott E. Byers Jason P. Kairalla Robert B. Shapiro Dimitrije Canic Steven Kass R. Jeffrey Smith Richard T. Choi Jeanne M. Kohler Irma R. Solares Stephen Choi Stephen W. Kraus Jeffrey L. Williams Gary O. Cohen Thomas C. Lauerman Michael N. Wolgin Robert W. DiUbaldo Chip C. Lunde Edmund J. Zaharewicz Stephanie A. Fichera Julianna T. McCabe Todd M. Fuller Jason A. Morris Ann B. Furman

Life, Annuity, and Retirement Solutions | Volume IV, December 2019 • EXPECTFOCUS.COM 23 CARLTON FIELDS serves business clients in key industries across the country and around the globe. Through our core practices, we help our clients grow their businesses and protect their vital interests. The firm serves clients in eight key industries:

Life, Annuity, and Retirement Solutions Property and Casualty Insurance Banking, Commercial, and Consumer Finance Real Estate Construction Securities & Investment Companies Health Care Technology & Telecommunications

For more information, visit our website at www.carltonfields.com.

Atlanta Orlando One Atlantic Center SunTrust Center – Main Tower 1201 W. Peachtree Street | Suite 3000 200 S. Orange Avenue | Suite 1000 Atlanta, Georgia 30309-3455 Orlando, Florida 32801-3456 404.815.3400 | fax 404.815.3415 407.849.0300 | fax 407.648.9099

Hartford Tallahassee One State Street | Suite 1800 215 S. Monroe Street | Suite 500 Hartford, Connecticut 06103-3102 Tallahassee, Florida 32301-1866 860.392.5000 | fax 860.392.5058 850.224.1585 | fax 850.222.0398

Los Angeles Tampa 2029 Century Park East | Suite 1200 Corporate Center Three Los Angeles, California 90067-2913 at International Plaza 310.843.6300 | fax 310.843.6301 4221 W. Boy Scout Boulevard | Suite 1000 Tampa, Florida 33607-5780 Miami 813.223.7000 | fax 813.229.4133 Miami Tower 100 S.E. Second Street | Suite 4200 Washington, DC Miami, Florida 33131-2113 1025 Thomas Jefferson Street, NW 305.530.0050 | fax 305.530.0055 Suite 400 West Washington, DC 20007-5208 202.965.8100 | fax 202.965.8104 New Jersey 180 Park Avenue | Suite 106 Florham Park, New Jersey 07932-1054 West Palm Beach 973.828.2600 | fax 973.828.2601 CityPlace Tower 525 Okeechobee Boulevard | Suite 1200 West Palm Beach, Florida 33401-6350 New York 561.659.7070 | fax 561.659.7368 Chrysler Building 405 Lexington Avenue | 36th Floor New York, New York 10174-3699 212.785.2577 | fax 212.785.5203

Carlton Fields, P.A. practices law in California through Carlton Fields, LLP.