Why I think FINRA is behind it

[URDRWHO]

Drudge has headlines such as this today.........

<FRIGHT OF THE FINANCIALS...

Fed eyes extending emergency loans for Wall Street...

MORTGAGE MESS: FREDDIE, FANNIE Plunge on Speculation Firms May Need to Raise $75 Billion...

...home loan titans at risk?>

With such loses taking place on Wall Street I think the bigger wirehouse member firms have bent the ear of FINRA and NASAA asking them to put the pressure on the SEC. Wall Street sees the future of baby boomer's moving even more money from the equities markets. So the wirehouses want:

1. FIA's to be "their" product
2. IF they control FIA's they can control, slow down the movement out of equities.

When you read that the SEC feels that benefits outweigh the increasing costs, loss of revenue and diminished competition, my question is...."benefits who?" I don't think Econ 101 ever teaches that increased costs, loss of revenue and diminished competition is ever good for the buyer of the product.

Therefore I say it benefits:

1. Big wirehouses
2. FINRA $membership

Summary of SEC Proposal to make Index Annuities Securities - 7/2/2008 - insurancenewsnet.com
By Jack Marrion

"In any event, the proposal says it would enhance investor protection, because index annuities would be regulated by FINRA and sold by registered representatives. The proposal also asks whether the securities treatment should be extended to index life insurance or any fixed insurance product using a market value adjustment.

SEC notes that this proposal will have costs and could result in a loss of revenue and diminished competition, but that the benefits outweigh the costs. SEC is accepting comments of the proposal until Sept. 10 and the proposal will be effective for all index annuities sold one year after adoption."

 

[CHUMPS FROM OXFORD]

Interesting take on this.

I saw the Drudge headline this morning (I usually check on his report a few times per day). I skipped it and instead read the article about Tel Aviv and US interests getting hit and the woman with 11 toes.

 

[Mr. Bill]

Absolutely, you're right.

The retail side of the wirehouses (where your future clients have their money) exist to have a captive group of investors (hmmmm.....IRA rollover clientele) to shove their sh****t onto.

There is NO wirehouse whose "chief investment strategist" will say "SELL" regardless of the health of the market. They exist to keep Main Street moms and pops exposed to equities at all times.

This is just another way for them to keep assets on the books (assets which they shouldn't have in the first place!)

 

[JMO Fan]

EIA Securities Registration Advantages

Benefit to consumers: More consistent, compliant, & complete disclosure

Benefit to sellers: More consistent documentation of suitability, defense against discontent

Benefit to companies: Clearer compliance requirements, level playing field

Benefit to all: Stronger, suitable sales => better persistency

Benefit to non-EIA buyers: separate account => no diversion from general account to EIAs

 

[Mr. Bill]

Ha ha ha ha ha - Suitability my ARSE!!!!

Who do you think were purchasing shares of all the mortgage REITs and banks that went under/are going under?

Suitability is an absolute misnomer in the securities industry.

Just one example:

Ruined by 401[k] Predators: Financial News - Yahoo! Finance

And I bet the Morgan Stanley brokers have the asset allocation documentation to prove they weren't making bad recommendations!

 

[URDRWHO]

Re: EIA Securities Registration Advantages

Ya gotta be kidding.

Believing that Wall Street is clean would make one to be considered almost a childish wish. Wall Street has possibly produced some of the most scandals in history.

For some reason you hypothesize that the more paperwork that is thrown out will turn an unethical person into an ethical person. In the years I was a commodity broker, the 15 years I spent as a Series 3 person and the 2 years as a State RIA....your hypothesis never held true. My CRD was 100% clean but there were a lot that were the opposite.

Benefit to consumers: More consistent, compliant, & complete disclosure

Benefit to sellers: More consistent documentation of suitability, defense against discontent

Benefit to companies: Clearer compliance requirements, level playing field

Benefit to all: Stronger, suitable sales => better persistency

Benefit to non-EIA buyers: separate account => no diversion from general account to EIAs

 

[URDRWHO]

I know that JMO doesn't understand the politics involved but this statement in the story tells it all..........."Not surprisingly, that money pot -- and the fat asset management fees it will generate -- has financial-services firms salivating."

Hence the reason Wall Street is pushing the SEC for the rule over the FIA. If Wall Street controls the FIA they can kill it or if it proves profitable to them, use it.

Ha ha ha ha ha - Suitability my ARSE!!!!

Who do you think were purchasing shares of all the mortgage REITs and banks that went under/are going under?

Suitability is an absolute misnomer in the securities industry.

Just one example:

Ruined by 401[k] Predators: Financial News - Yahoo! Finance

And I bet the Morgan Stanley brokers have the asset allocation documentation to prove they weren't making bad recommendations!

 

[JMO Fan]

Seniors commonly, continually complain about poor disclosure. Too often, they don't remember what was disclosed, and have tossed all paperwork except (hopefully) the contract. That leaves the agent & company exposed unless they've kept extremely complete, detailed records -- and even then, there are too many courts (and state consumer reps) whose bias is consistently consumer-friendly.

It seems unproductive to say that EIAs shouldn't be registered because "securities regulation doesn't help." The SEC is likely to see that as a slap in the face, not a valid argument, and they'd tend to ignore any other comments associated with that one. The strongest argument would seem that EIAs don't fit the legal definition of a security (which, considering prior SEC & FINRA comments as well as the statutes and court decisions, seems a very difficult view to defend).

I have read of some state insurance dept opposition to 151a. That seems based upon fear that SEC wants to purloin political power from the states, which I think is unfounded. The SEC has never wanted to regulate insurance, and has crafted the proposed rule to leave as much administration as possible to state insurance departments.

 

[URDRWHO]

I could care less what the SEC thinks because I am not even addressing them. I've bypassed them and have courted help from our elected officials.

At different stages in life we can't even remember where we parked the car. To those that can't find their way hoe or remember where they parked the car no amount of disclosure is going to help them remember? When I can't find my car in the lot I act as if I am doing other things aside from looking for my car. I don't want some young'un looking over laughing at the old-ster that can't find their car.

My father is almost 90 years old and needed a new lounging chair. So I got him a lazy boy recliner. It was delivered on Saturday and already today he is complaining that it doesn't go back easy enough. Seniors can not always be easily satisfied and the SEC won't change it.

Maybe we should not allow seniors to own mutual funds, FIA's, secondary market mortgages, etc. Only allow them to get CD's or passbook saving rates on their money. That would take care of it. Now with the real rate of inflation at a much higher rate than the phony CPI Index, the seniors would be taking a bath with CD's and passbook savings rates.

Ah maybe we shouldn't even discuss inflation risk with a senior because you know....it is all too complicated.

You must be joking when you say you don't think the SEC wants to wrestle power away from the States. Have you been living in a cave for the past 30 years? On many levels the Federal government has been wrestling power away from the States. Why would you think the SEC isn't headed in the same direction. They currently want State RIA's to come under the FINRA umbrella. Why not insurance?

You talk about exposed as if agents aren't skilled enough to use risk management. If an agent isn't time stamping and making a memo of every phone call, documenting, documenting, documenting, even under the SEC rules they will find trouble.

When I was doing securities business and you called me, your account was up, the F5 key was hit, the phone call timer started and I was typing in the conversation. On various occasions I would have someone (being polite here) say they didn't give a buy or sell order. Yet the funny thing was, when I pull up the date, the time, what was send, etc., all of the sudden their memory became very, very clear. The memory lapses only occurred when the market moved against their order. Hm????

Now if the SEC wants to start pushing for an alternative SRO, other than FINRA, I'll jump on their band wagon. An SRO that isn't actively managed and run by the major brokerages would go far in opening up competition.

Seniors commonly, continually complain about poor disclosure. Too often, they don't remember what was disclosed, and have tossed all paperwork except (hopefully) the contract. That leaves the agent & company exposed unless they've kept extremely complete, detailed records -- and even then, there are too many courts (and state consumer reps) whose bias is consistently consumer-friendly.

It seems unproductive to say that EIAs shouldn't be registered because "securities regulation doesn't help." The SEC is likely to see that as a slap in the face, not a valid argument, and they'd tend to ignore any other comments associated with that one. The strongest argument would seem that EIAs don't fit the legal definition of a security (which, considering prior SEC & FINRA comments as well as the statutes and court decisions, seems a very difficult view to defend).

I have read of some state insurance dept opposition to 151a. That seems based upon fear that SEC wants to purloin political power from the states, which I think is unfounded. The SEC has never wanted to regulate insurance, and has crafted the proposed rule to leave as much administration as possible to state insurance departments.

 

[JMO Fan]

...You must be joking when you say you don't think the SEC wants to wrestle power away from the States. Have you been living in a cave for the past 30 years? On many levels the Federal government has been wrestling power away from the States. Why would you think the SEC isn't headed in the same direction. They currently want State RIA's to come under the FINRA umbrella. Why not insurance?

When EIAs were first introduced (in general accounts), I called the SEC to ask if they knew about EIAs. The branch office chief for insurance told me, "Yes, they're all filed with us." I said, "No, they're not. I have a couple on my desk. Would you like to see them?" He declined.

A week later, I called to follow up (and to get a copy of their 1986 Federal Register release). He said, "I've discussed this with my supervisor; some of them might be exempt." It was clear they had other priorities, like snakes selling scams involving underwater beachfront property.

The SEC had a golden opportunity to regulate viaticals when they first became popular. Viaticals were marketed to many people as the new high-return low-risk investment. The SEC consistently declared that viaticals were the domain of insurance regulators (who had no basis for viatical regulation).

I've worked with a number of state securities regulators through the years. They were always happy to discuss both registered and non-registered insurance contracts. But in every case, they continually tried to postpone any action, because they had neither sufficient interest nor understanding to pursue it.

The SEC doesn't have staff, budget, or knowledge to regulate insurance. The proposed rule defers reporting to the states, and pretends that past EIAs need not be addressed. That's hardly a power grab.