FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProcessing Customer Orders and TransactionsHard
A client verbally informs their registered representative that they want to redeem shares from their variable annuity contract. Which of the following is the MOST important step the representative must take next?
- AInform the client of the current unit value and potential tax implications.
- BImmediately execute the redemption order at the current market price.
- CObtain a written and signed redemption request from the client.
- DAdvise the client to reconsider their decision due to potential surrender charges.
Show answer & explanationAnswer & explanation
Correct answer: C. Obtain a written and signed redemption request from the client.
Redemptions from variable annuities, especially full surrenders, typically require a written and signed request from the client to the insurance company. This is a crucial step to ensure proper authorization and prevent fraudulent activity. While informing about unit value, tax implications, and surrender charges are important, obtaining the written request is the necessary step for processing the order.
Why the other options are wrong
- A. This is important information to provide, but not the *next* step to *process* the order.
- B. Variable annuities are not executed at 'current market price' and require written authorization, not immediate verbal execution.
- D. While good advice, it's not the first step to *process* the client's stated desire to redeem.
Variable Annuity Redemption Request
A client's instruction to withdraw funds from a variable annuity, typically requiring a written and signed request.
- Written authorization is paramount.
- Protects against unauthorized redemptions.
- Processed by the insurance company.
Memory trick: Verbal desire, written acquire.