State RegulationsMA specificDifficulty 3/5
Which statement best describes the regulatory scheme that applies when a Massachusetts resident buys a variable annuity?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A variable annuity is simultaneously a security and an insurance product, so two regulatory layers apply at once. On the federal side, the securities framework — administered with oversight by the Securities and Exchange Commission through FINRA-member broker-dealers — governs the securities registration of the product and its sales representatives. On the state side, M.G.L. c. 175, § 132F et seq. and 211 CMR 95, administered by the Massachusetts Division of Insurance, govern the insurance dimension in Massachusetts. Neither layer displaces the other.
Why the other options are wrong
- B) Federal securities oversight does not preempt the state's insurance regulation; the Massachusetts Division of Insurance administers M.G.L. c. 175, § 132F et seq. and 211 CMR 95 for variable contracts sold in the state.
- C) The securities dimension is real: selling a variable annuity requires the federal securities registration in addition to state insurance authority.
- D) Variable annuities are heavily regulated on both the federal and Massachusetts sides; no insurer designs them outside these frameworks.
Memory hook
Variable = two sheriffs: federal securities oversight plus the Division of Insurance.