AMENDMENT TO
MARKETING ORGANIZATION AGREEMENT
OF SECURITY DISTRIBUTORS, INC.
Effective May 2, 2006
WHEREAS, you have entered into a Marketing Organization Agreement with Security
Distributors, Inc. ("SDI") (solely in its capacity as underwriter of the
Variable Products issued by the insurance company(s), including First Security
Benefit Life Insurance and Annuity Company of New York, (each referred to herein
as "insurance company") identified in the Commission Schedule(s)) (hereinafter
called the "Agreement"); and
WHEREAS, SDI desires to amend the Agreement as set forth below;
NOW, THEREFORE, the Agreement is hereby amended by deleting in its
entirety Section III and replacing it with the following:
III. COMPLIANCE
A. GENERAL REQUIREMENTS. Marketing Organization agrees to abide by all
applicable local, state and federal laws and regulations, as well as the
rules and regulations of the NASD and SEC in conducting business under this
Agreement. Marketing Organization shall insure that all of its Marketers
comply with all such rules, laws, and regulations. Marketing Organization
agrees to comply with, and to cause their Marketers to comply with, any
sales manuals and/or policies, procedures, rules and practices of SDI
relating to the Products, privacy, Marketer conduct and similar matters and
provided to Marketing Organization, as these sales manuals and/or policies,
procedures, rules and practices of SDI are now in effect or may be amended
or established in the future by SDI in its sole discretion. Marketing
Organization agrees to notify SDI immediately in writing if it or any
Marketer fails to comply with any applicable local, state and federal law
and regulation (including NASD and SEC rules), or SDI's sales manuals
and/or policies, procedures, rules and practices.
B. SUITABILITY. Marketing Organization agrees to abide by all applicable state
and federal laws and regulations concerning suitability. Marketing
Organization further agrees to abide by NASD rules and interpretive
guidance regarding suitability, as applicable. Marketing Organization,
through a senior manager who has responsibility for suitability functions,
shall provide upon SDI's request, an annual certification certifying that
Marketing Organization is performing suitability functions as required by
applicable state and federal laws and regulations and NASD Conduct Rules.
Marketing Organization agrees to allow SDI to perform suitability audits
from time to time. Suitability audits may be performed at any of Marketing
Organization's sites, via electronic communication, or other means, as
deemed appropriate by SDI. If an audit is conducted at Marketing
Organization's site(s), Marketing Organization agrees to allow SDI
reasonable access to the building, and books and records as requested by
SDI or its representatives.
C. SUPERVISION OF MARKETERS. Marketing Organization shall recruit, train and
supervise Marketers for the sale of the Products. Marketing Organization
shall be responsible for any Marketer appointed hereunder complying with
the terms, conditions, and limitations as set forth in this Agreement and
any sales manuals and/or policies, procedures, rules and practices of SDI.
Marketing Organization shall supervise all Marketers and be responsible for
their training and compliance with applicable insurance laws and
regulations, and if any act or omission of a Marketer or employee of
Marketing Organization is the proximate cause of any loss, claim, damage,
liability or expense (including reasonable attorneys' fees) to SDI,
Marketing Organization shall be liable therefore. Marketing Organization
shall supervise its Marketers and be responsible for their training and
compliance with applicable federal and state securities laws and
regulations and the rules of the NASD, and if any act or omission of a
Marketer or employee of Marketing Organization is the proximate cause of
any loss, claim, damage, liability or expense (including reasonable
attorneys' fees) to SDI, Marketing Organization shall be liable therefore.
Marketing Organization shall insure that only Marketers solicit
applications for Variable Products. SDI shall not have any responsibility
for the supervision, training or compliance with any law or regulation of
any Marketer or any employee of Marketing Organization, and nothing in this
Agreement shall be deemed to make such a Marketer or employee an agent or
employee of SDI.
Marketing Organization shall (i) supervise Marketers' compliance with all
applicable suitability requirements under state insurance laws and
regulations and (ii) provide adequate training to insure that Marketers
have thorough knowledge of each Fixed Product and the ability to make
appropriate product presentations and suitability determinations in
compliance with applicable law. Marketing Organization also shall (i)
supervise Marketers' compliance with all applicable suitability
requirements under federal and state securities laws and regulations and
NASD rules and (ii) provide adequate training to insure that Marketers have
thorough knowledge of each Variable Product and the ability to make
appropriate product presentations and suitability determinations in
compliance with applicable law. Marketing Organization shall not, and shall
cause the Marketers not to, recommend the purchase of a Product to a
prospective purchaser unless it has reasonable grounds to believe that such
purchase is suitable for the prospective purchaser and is in accordance
with applicable rules and regulations of any regulatory authority,
including, in the case of Variable Products, the SEC and the NASD.
Marketing Organization, in submitting an application for a Product, shall
be deemed to have warranted to SDI, that it has made a determination of
suitability based on information concerning the prospective purchaser's
insurance and investment objectives, risk tolerance, need for liquidity,
and financial and insurance situation and needs, or on such other factors
that Marketing Organization deems appropriate under the circumstances and
in compliance with applicable law.
If a Marketer performs any unauthorized transaction with respect to a
Product, fails to submit to the supervision of or otherwise meet the rules
and standards of Marketing Organization, or fails to hold any required
license, appointment, registration or association with Marketing
Organization, Marketing Organization immediately shall notify SDI in
writing and act to terminate the sales activities of such Marketer relating
to the Products.
Upon request by SDI, Marketing Organization shall furnish appropriate
records or other documentation to evidence the diligent supervision of
Marketers by Marketing Organization.
D. LICENSING. Marketing Organization agrees that neither it nor the Marketers
shall solicit or submit applications for any of the Products unless
Marketing Organization and its Marketers are properly licensed under all
applicable state insurance laws. Marketing Organization
shall be responsible for each Marketer becoming so licensed and shall
notify SDI if any Marketer ceases to be so licensed. With respect to sales
of Variable Products: (1) Marketing Organization hereby confirms that it is
a member in good standing of the NASD and agrees to notify SDI if it ceases
to be a member of the NASD, (2) Marketing Organization agrees to abide by
the applicable NASD Conduct Rules, which rules are incorporated herein as
if set forth in full, and (3) Marketing Organization shall insure that all
Marketers are duly registered pursuant to applicable state and federal
securities laws and regulations and shall notify SDI if any Marketer ceases
to be so registered.
Marketing Organization shall provide to SDI adequate proof of any licenses,
securities registration, bonds or other requirements or qualifications as
may be required by SDI or the state or states where Marketing Organization
is authorized to solicit insurance and securities.
E. ANTI-MONEY LAUNDERING. Marketing Organization agrees to abide by all
applicable federal laws and regulations regarding anti-money laundering
("AML"), including the "know your customer" requirements. Marketing
Organization acknowledges that SDI and insurance company expect Marketing
Organization to perform all required customer identification under
insurance company's AML program and any suspicious activity monitoring
under insurance company's AML program where Marketing Organization is in a
position to monitor for suspicious activity. Marketing Organization will
certify to insurance company at least annually that it will perform such
customer identification responsibilities and has implemented an AML
program, and Marketing Organization will provide such other periodic
AML-related certifications as insurance company may request. In addition,
Marketing Organization will (1) notify insurance company of any customer
identification or suspicious activity issues it identifies; (2) provide or
arrange for the provision of AML training for appropriate personnel of
Marketing Organization; and (3) allow reasonable access for insurance
company's examiners (including outside examiners retained by insurance
company) and appropriate government examiners to assess Marketing
Organization's performance of the above obligations.
If Marketing Organization relies on a registered investment adviser to
perform certain procedures required by the customer identification rules,
Marketing Organization must ensure that: (1) such reliance is reasonable
under the circumstances; (2) the investment adviser is regulated by a
federal functional regulator (i.e., the SEC); and (3) the investment
adviser and the Marketing Organization enter into a contract requiring the
investment adviser to certify to Marketing Organization no less frequently
than annually that it has implemented an AML program, and that it will
perform (or its agents will perform) specified requirements of Marketing
Organization's customer identification program. Further, to the extent
requested by insurance company, Marketing Organization shall provide to
insurance company copies of certifications received by the Marketing
Organization from investment advisers it is relying upon to meet its
customer identification responsibilities.
Section VII.A. of the Agreement is hereby deleted in its entirety and
replaced with the following:
A. CONFIDENTIALITY. This Confidentiality provision shall survive the
termination of this Agreement.
1. Definition. "Confidential Information" for the purposes of this
Agreement shall include all information of SDI and/or any of its
affiliates to which Marketing Organization has had or will have
access, whether in oral, written, electronic, graphic or
machine-readable form, including without limitation business or
financial information, customer information, customer names,
operations or systems manuals, decision processes, specifications,
profiles, system and management architectures, diagrams, graphs,
models, sketches, technical data, research, plans, strategies,
forecasts, forecast assumptions, business practices, marketing
information and material, proprietary ideas, concepts, know-how,
methodologies and all other information related to SDI's business
and/or the business of any of its affiliates. Confidential Information
shall also include all information of a third party to which SDI
and/or any of its affiliates have access and to which Marketing
Organization or any of its Representatives (as defined below) has had
or will have access, incorporating any of the information described
herein.
Confidential Information expressly includes "NPI." NPI has the meaning
ascribed to "Nonpublic Personal Information" in Title V of the
Xxxxx-Xxxxx-Xxxxxx Act of 1999 or any successor federal statute, and
the rules and regulations thereunder, all as may be amended or
supplemented from time to time (collectively, "Applicable Law") as it
relates to SDI or its affiliates' customers. Marketing Organization
shall keep, and shall cause its Representatives to keep, NPI
confidential and may use and disclose NPI only as necessary to carry
out those specific aspects of the business purpose for which the NPI
is/was disclosed to Marketing Organization or the Marketers and in
accordance with this Agreement and Applicable Law. Confidential
Information also includes non-public personal or financial information
as defined by any applicable state or federal laws, rules or
regulations. Such definitions include, but are not limited to,
information protected under applicable state insurance or state
securities laws, as they may be amended from time to time.
Confidential Information shall not include information that: (a) is in
the public domain at the time of its use or disclosure to Marketing
Organization or the Marketers through no fault of Marketing
Organization or its Representatives; (b) was lawfully in the
possession of or demonstrably known by Marketing Organization or the
Marketers prior to its receipt from SDI or any of its affiliates; (c)
is independently developed by Marketing Organization or the Marketers
without use of or reference to the Confidential Information; or (d)
becomes known to Marketing Organization lawfully from a third party
that, to Marketing Organization's knowledge, is not subject to an
obligation of confidentiality to SDI or any of its affiliates.
2. Rights and Responsibilities. Marketing Organization represents,
warrants and covenants that Marketing Organization is capable, has
implemented and shall maintain appropriate physical, electronic and
procedural safeguards of the Confidential Information that comply with
state and federal laws and regulations, and that meet privacy
obligations hereunder. Marketing Organization shall maintain the
confidentiality of the Confidential Information using procedures
reasonably calculated to comply with state and federal laws and
regulations, as adopted and amended. Marketing Organization shall
exercise no less than a reasonable degree of care to not: (a)
transfer, disclose, allow access to or duplication of any of the
Confidential Information to or by any third party; (b) use any of the
Confidential Information for any purpose other than in connection with
the business purpose for which it was disclosed; or (c) take any other
action with respect to the Confidential Information inconsistent with
the confidential and proprietary nature of such information, without
prior written permission from SDI.
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Marketing Organization may disclose the Confidential Information to
the officers, directors, employees, Marketers, consultants, attorneys,
accountants, agents or other representatives (each, a
"Representative") of Marketing Organization who have a need to know
such Confidential Information solely in connection with the business
purpose for which it was disclosed, provided that Marketing
Organization shall: (i) cause such Representatives to comply with this
Agreement; and (ii) assume full responsibility for any breach of this
Agreement caused by any such Representatives. Marketing Organization
shall promptly notify SDI of any disclosure or use of any Confidential
Information by any of their Representatives in breach of this
Agreement. SDI reserves the right, without an obligation to do so, to
review Marketing Organization's policies and procedures used to
maintain the confidentiality of Confidential Information.
If Marketing Organization is required to disclose any of the
Confidential Information pursuant to a subpoena, court order, statute,
law, rule, regulation or other similar requirement (a "Legal
Requirement"), Marketing Organization shall, to the extent permitted
by law, provide prompt notice of such Legal Requirement to SDI so it
may seek an appropriate protective order or other appropriate remedy
or waive compliance with the provisions of this Agreement. If SDI is
not successful in obtaining a protective order or other appropriate
remedy and Marketing Organization is, in the opinion of its counsel,
compelled to disclose such Confidential Information under pain of
liability for contempt of court or other censure or liability, or if
SDI waives compliance with the provisions of this Agreement in
writing, then Marketing Organization may disclose, without liability
hereunder, such Confidential Information in accordance with, but
solely to the extent necessary, in the opinion of its counsel to
comply with, the Legal Requirement.
Marketing Organization acknowledges that a breach of its obligations
under this section on Confidentiality shall result in irreparable and
continuing damage to SDI for which monetary damages may not be
sufficient, and agrees that in addition to SDI's other rights and
remedies hereunder or at law, SDI shall be entitled to injunctive
and/or other equitable relief, and such further relief as may be
awarded by a court of competent jurisdiction.
SECURITY DISTRIBUTORS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Title: President
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