84-24 Disclosure Form Instructions for IRAs (Fixed Rate Annuities) GENERAL CONSIDERATIONS: For the most part, the disclosure form contains only the information that the exemption requires to be disclosed to IRA owners. There are other requirements that must be satisfied, described below. These may be added to the disclosure form, but are not required to do so. In recommending a fixed rate annuity, the agent must act in the Best Interest of the IRA owner. All statements by the agent about the recommended contract, fees and material conflicts of interest (see “Defined Terms”) must not be materially misleading. Failure to disclose a material conflict of interest is considered to be misleading. Information about the contract, carrier, material conflicts of interest and additional fees for holding the contract must be included on the disclosure form. The transaction must be effected in the ordinary course of the agent’s business, must be on terms at least as favorable to the retirement investor as an arm’s length transaction with an unrelated party would be, and the commission to be received by the agent must not exceed reasonable compensation for the services provided. The agent must not be a trustee or fiduciary with discretionary authority over the investment of assets of the IRA. The disclosures must be provided in writing prior to execution of the transaction. After receipt of the disclosures, and prior to execution of the transaction, the IRA owner must acknowledge in writing the receipt of the disclosures and approve the transaction. SPECIFIC INSTRUCTIONS: The annuity contract and the issuing insurance company should be identified in the form. If the agent is affiliated with the insurance company (see “Defined Terms”), that should be specified. If the agent is not affiliated, the statement should be deleted. If the agent’s ability to recommend annuity contracts is limited by an agreement, it should be affirmatively stated. If so limited, the affirmative statement should be included in the form given to the IRA owner. If the agent’s ability is not so limited, the paragraph can be deleted in its entirety. The agent’s commission for the first year and each succeeding year should be disclosed where indicated on the form. If feasible, it should be disclosed in dollar amounts. If that is not feasible, the commission should be disclosed as a percentage of gross annual premium payments, asset accumulation value, or contract value. (For example, it may not be feasible if the
Best Interest: This means that the agent must act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims, based on the investment objectives, risk tolerance, financial circumstances and needs of the retirement investor, without regard to the financial or other interests of the agent or any affiliate or other party. Material conflict of interest: A material conflict exists when a person has a financial interest that a reasonable person would conclude could affect the exercise of its best judgment as a fiduciary in rendering advice to a plan or IRA. Other charges, fees, discounts: Charges, fees, discounts, penalties or adjustments which may be imposed under the recommended contract in connection with the purchase, holding, exchange, termination, or sale of the contract. 86399816.6