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Enhancements to DTCC's Licensing & Appointment Service to Strengthen Customer Compliance

LNA Will Now Centralize the Tracking of Annuity Product and State Suitability Training as Modeled by the National Association of Insurance Commissioners (NAIC)

New York, April 19, 2011 — The Depository Trust & Clearing Corporation (DTCC) is developing an enhancement to its Licensing & Appointments (LNA) service — one of the core automation solutions from its Insurance & Retirement Services (I&RS) business — that will help carriers track and confirm if agents have been trained and certified to sell their specific annuity products.

These enhancements, which will help centralize the verification of completed mandated training, will roll out later this month.

Managing State-Level Regulations

Within financial services, insurance is a unique business because it is primarily regulated at the individual state level — unlike banking and securities investments, which are regulated by federal agencies. This means that insurance firms must deal with up to 50 different sets of state regulations and 50 different state regulatory agencies

This new education component for insurance agents is a result of the state-level Suitability in Annuity Transactions Model Regulation introduced last year by NAIC. Specifically, all agents must take a four-hour certification course on the fundamentals of annuities, as well as complete product-specific training from carriers for which they solicit annuities.

Each state law has its own specific requirements and training deadlines, and will set its own effective date. There are currently 11 states/jurisdictions that have adopted regulations requiring further annuity education, including California, Colorado, District of Columbia, Florida, Iowa, Ohio, Oklahoma, Oregon, Rhode Island, Texas, and Wisconsin. Nine additional states have proposed regulations. Iowa was the first state to mandate regulations, beginning Jan. 1, 2011, and others are scheduled beginning second quarter, 2011.

"Customers on our Senior Advisory Board approached us with this issue late last September," said Adam Bryan, managing director, I&RS. "The looming 2011 deadline posed a serious challenge for the industry, since carriers really had no way to centralize the verification of this producer training.

"We saw an immediate fit within LNA, our service that automates and standardizes the two-way flow of information needed to manage producer authorization information between insurance carriers and distributors. We quickly formed a customer task force, and started to work through how we could accommodate these new data requirements with a service enhancement to LNA."

Phase I Enhancements

In Phase I of the project, which will be fast-track tested for two weeks in April, I&RS has built enhancements to LNA that can take a standardized delimited data file feed from the education vendors who provide this producer training, and translate into the industry-standard LNA format. The new data fields built into the LNA system will then be able to accommodate this training data, so carriers can quickly verify if the agents have been trained and certified.

Some distributors and carriers are using vendors to support their training efforts. The vendors are not required to become members of DTCC's subsidiary, the National Securities Clearing Corporation (NSCC). They will also not be charged to provide training completion data, nor are required to actually build LNA.

"We wanted to eliminate any possible barriers for the vendors to engage with us," said Lana Macumber, director, I&RS Strategy and Business Development.

In the next iteration of the project, I&RS will extend these enhancements to the LNA Access Platform, the standalone online reporting tool that distributors use to enter, edit, and retrieve various sets of pre-defined required licensing and appointment data.

DTCC is currently working with seven education vendors, including Kaplan, PinPoint (partnering with LIMRA), QuestCE, RegEd (partnering with IRI), Sircon, SuccessCE (partnering with NAFA), and WebCE.

Phase II Enhancements

In the next phase of the project, targeted for early 2012, I&RS envisions being able to provide real time producer authorization messaging for point-of-sale and transaction processing. By leveraging ACORD XML for producer authorizations, I&RS would be able to navigate these messages to and from requestor to end carrier.

About DTCC

DTCC, through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC's depository provides custody and asset servicing for more than 3.6 million securities issues from the United States and 121 other countries and territories, valued at US$36.5 trillion. In 2010, DTCC settled nearly US$1.66 quadrillion in securities transactions. DTCC has operating facilities and data centers in multiple locations in the United States and overseas. For more information, please visit www.dtcc.com.