State RegulationsPA specificDifficulty 2/5
Which statement best describes how a variable annuity is regulated for a Pennsylvania consumer?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
A variable annuity is both an insurance contract and a security, so it is regulated on two tracks. In Pennsylvania, the Insurance Company Law framework and the variable-annuity rules at 31 Pa. Code 85.1 govern the insurer, the separate account, and the contract, with oversight by the Pennsylvania Insurance Department. At the federal level, securities regulators — the SEC and FINRA, named here as programs in words — regulate the securities features and the licensing of those who sell them. Neither track alone covers the product.
Why the other options are wrong
- A) Federal securities oversight does not displace Pennsylvania; the Pennsylvania Insurance Department regulates the insurer and the variable contract itself.
- B) State regulation alone cannot reach the securities features; the SEC and FINRA share jurisdiction over the variable product's investment character.
- D) Owner-directed investments do not remove the product from regulation; both the state insurance framework and federal securities law apply.
Memory hook
Two hats, two regulators: insurance in Harrisburg, securities in Washington.