Tennessee latest to pressure insurance agents to become securities licensed

By Roccy Defrancesco

The Wealth Preservation Institute


Editor's note: The links to the Arizona, Iowa and Tennessee state bulletins have been updated to open directly to the original documents.

Last year, ProducersWEB ran one of my best-read articles, States are forcing insurance agents to become securities licensed. The article detailed what is known as the source-of-funds rule (SOF) and how the states of Arkansas and Iowa were using this rule to essentially force life/annuity insurance agents to become securities licensed.

What is SOF?

It is simply asking where did the money come from to fund a fixed life or annuity contract; what is the source of funds? If the money to fund a fixed insurance product came from the liquidation of stocks, mutual funds, etc., Arkansas and Iowa would say that you are violating the law if you do so without having a securities license. This includes money in IRAs.

To read the Arizona bulletin detailing its position on the SOF rule, click here. For the Iowa bulletin, click here.

Tennessee follows

As could be expected, the state of Tennessee is the latest one to use the SOF rule as an excuse to regulate insurance advisors. Julie McPeak, Commission Department of Commerce & Insurance for the State of Tennessee, issued an eight-page bulletin to all insurance and securities licensed advisors. To read the eight-page bulletin, please click on this link.

The poison pill

Like Arkansas and Iowa, the Tennessee bulletin says the following: Insurance-only licensed advisors cannot recommend the liquidation of investments/securities to fund a fixed life or annuity product. A violation will cost insurance agents up to a $10,000 per violation and a potential loss of license.

What’s the big deal?

You will be out of business sooner rather than later, if you don’t have some sort of securities license.