On June 24, 2011, the Iowa Insurance Division, which regulates insurance and securities, issued identical companion bulletins outlining the permitted and prohibited activities of "Insurance-Only Persons" and "Securities-Only Persons." See Insurance Bulletin 11-4 and Securities Bulletin 11-S-1. The bulletins are primarily designed to provide guidance where a customer "may choose" to sell securities or insurance in order to purchase insurance or securities, respectively, that are recommended by an Insurance-Only or Securities-Only Person. The guidance is broadly worded, however, and therefore instructive in other contexts.
The bulletins provide that an Insurance-Only Person - an Iowa insurance licensed person who is not licensed in Iowa as an investment adviser, securities agent, or investment adviser representative - may discuss the stock market in general terms, but only to the extent necessary in the course of providing insurance services and making suitable recommendations about insurance or annuities.
Likewise, the bulletins provide that a Securities-Only Person - an Iowa licensed investment adviser, securities agent, or investment adviser representative who does not hold an Iowa insurance license - may discuss insurance in general terms in the context of managing risk and recent and historic insurance activities that are generally known to the public and regularly discussed in the public media, but only to the extent necessary in the course of providing securities services and making suitable securities recommendations.
The bulletins make clear, however, that specific discussions about matters for which a person is not licensed are not permitted. An Insurance-Only Person, for example, may not discuss the risk of a consumer's securities portfolio, provide advice about specific securities, or recommend the liquidation of specific securities as the source of funds for an insurance transaction. Likewise, a Securities-Only Person, for example, may not discuss the pros and cons of a consumer's specific insurance policy or recommend the liquidation of an insurance product. In addition, neither an Insurance-Only Person nor a Securities-Only Person may recommend a specific allocation, in dollars or percentages, between securities and insurance products.
The bulletins generally prohibit unlicensed persons from completing forms with regard to matters for which the person is not licensed, with limited exceptions that accommodate situations where the source of funds may require input to complete either an insurance form or securities form. The bulletins also remind dually licensed individuals that they have a fiduciary duty and may be required to make additional disclosures.