February 18, 1992
TO: CONTRACTUAL PLANS COMMITTEE NO. 4-92
RE: INSTITUTE COMMENTS ON REVISED NASAA COMMITTEE CONTRACTUAL
PLAN GUIDELINES
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The Institute recently submitted the attached comment
letter to the NASAA Investment Company Registration/Trading
Practices Committee ("Committee") on the Committee's revised
proposed guidelines with respect to state regulation of
contractual plans.
In its comment letter, the Institute recommended that
rather than imposing a requirement that the dealer substitute his
judgment for that of the investor with respect to the relative
merits of investing in a contractual plan, the proposed
requirement be replaced with a restatement of the NASD's
suitability rule. In addition, the Institute questioned the
logic of the revised proposal which would have provided that
contractuals plan are inappropriate for certain retirement plans
and recommended that this provision be deleted.
The Institute further recommended that the guidelines
contain a definition of "current account" and offered a revised
definition for "persistency rate." Moreover, the Institute
expressed support for adoption of a persistency goal of 65%.
The Institute also recommended that the mandatory
notification of refund rights extend only to those investors who
have missed a payment and that there should be no prohibition
upon initiating contact with the investor. In closing, the
Institute again reiterated its opposition to restricting the
investment objective of the underlying fund.
The Institute will be meeting with members of the Committee
on February 20th in Boston to discuss the Committee's revised
guideline and the issues discussed in the Institute's comment
letter. We will keep you advised of developments.
Patricia Louie
Assistant General Counsel
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