Regulation of Distribution Activities

THE NASD GIVES THE QUALIFICATION EXAMINATIONS IN THE SECURITIES INDUSTRY, AS WELL AS FOR THE INSURANCE INDUSTRY, FOR VARIABLE PRODUCTS AND MUTUAL FUNDS. CURRENTLY, THE NASD HAS APPROXIMATELY 20 COMPANIES WHICH ARE REGISTERED TO SELL VARIABLE PRODUCTS, PLUS MANY MORE AFFILIATES AND SUBSIDIARIES OF SUCH COMPANIES. THE NASD PROGRAM FOR DISCIPLINARY ACTIVITY IS REQUIRED BY STATUTE AND INVOLVES A NETWORK OF PAID EXAMINERS ON THE STAFF OF THE NASD WHO PAY SURPRISE VISITS UPON MEMBERS. THEY MAKE EXAMINATIONS FOR CAUSE. THERE IS A FAIR AND ORDERLY PROCESS FOR APPEAL TO THE COMMISSION AND TO THE COURTS. OVERALL, IT APPEARS THAT THE GENERAL MELTING OF THE INSURANCE AND SECURITIES INDUSTRIES IN THE VARIABLE PRODUCT AREA SEEMS TO HAVE WORKED WELL AND WILL CONTINUE TO DO SO.