Recent State Fiduciary Duty Developments: Arizona Enacts Best Interest Standard

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Faegre Drinker Biddle & Reath LLP

Arizona has become the second state after Iowa to enact a best interest standard for the sale of annuities. Like the Iowa law, both of which become effective January 1, 2021, Arizona’s law is modeled after the National Association of Insurance Commissioners (NAIC) model regulation. The new law requires insurance producers to “act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.”

A producer is required to act with diligence, care and skill to obtain information about the consumer’s financial condition and needs, and to maintain detailed records. Under the new law:

  • Monitoring is not required unless specifically agreed to with the consumer
  • The law may be enforced only by the Arizona insurance department
  • The law does not create a private right of action for consumers
  • The law specifies that a producer that is complying with Reg BI or the SEC’s RIA interpretation or with the ERISA fiduciary requirements is deemed to meet the requirements of the statute.

Download a copy of our updated Best Interest and Fiduciary Developments chart.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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