Question

Regarding variable annuities, which of the following statements is TRUE?

A. If a client exchanges a variable annuity, there is no penalty assessed
B. A principal of a broker-dealer is not required to review the subaccounts that are recommended by an RR if the client meets the suitability requirements for a variable annuity
C. If a client withdraws the proceeds from a variable annuity before the age of 59 1/2, any penalty is waived by the insurance company
D. A registered principal is required to review and approve a transaction in a variable annuity

Answer 1

The correct statement about variable annuities is that a registered principal is required to review and approve any transactions involving them, as part of their supervisory duties. The correct statement regarding variable annuities is D.

Step-by-step explanation:

Regarding variable annuities, the statement that is TRUE is: D. A registered principal is required to review and approve a transaction in a variable annuity. This is part of the supervisory responsibilities within a broker-dealer to ensure that every investment transaction, including variable annuities, is suitable for the client and complies with the applicable regulations.

Statements A and C are incorrect because if a client exchanges a variable annuity, there may be surrender charges, and withdrawals before age 59 1/2 typically incur a penalty by the IRS, not waived by the insurance company. Statement B is also incorrect because principals are required to review the specific subaccounts within a variable annuity as part of their oversight role.

The correct statement regarding variable annuities is D. A registered principal is required to review and approve a transaction in a variable annuity. Variable annuities are investment products that are regulated by the Securities and Exchange Commission (SEC). As such, a registered principal is required to review and approve any transactions involving variable annuities to ensure compliance with regulatory requirements.