SEC says FIA's are securities!!

[indaville]

UPDATE 1-US SEC wants to oversee equity indexed annuities | Markets | Markets News | Reuters

 

[xrac]

SEC OKs proposed annuity rule

 

[Mr. Bill]

Well, they can think what they like, but just because Chris Cox says it is so, does not make it so. Who do you think is going to win in this bear fight? I'm betting on the insurance companies!

 

[pebble head]

Either way I'm safe with my 6 and 63!

 

[djs]

Well, they can think what they like, but just because Chris Cox says it is so, does not make it so. Who do you think is going to win in this bear fight? I'm betting on the insurance companies!

They'll both win, it's not exclusive. Think about VUL's, an insurance product that is securities controlled (or variable annuities).

After I received an ad selling EIA's the other day, I became convinced that people selling them need to spend some time dealing with suitability.

Dan

 

[JMO Fan]

Well, they can think what they like, but just because Chris Cox says it is so, does not make it so. Who do you think is going to win in this bear fight? I'm betting on the insurance companies!

I'm betting on the regulators. Dateline plus a huge consumer complaint record is convincing the SEC. The states/NAIC need SEC support to solidify suitability.

The SEC has dragged its feet for years, and this proposal is full of concessions to the industry. They won't act quickly, but they said 20+ years ago that indexed products were outside their safe harbor. A rich politically connected consumer who feels cheated could win a securities lawsuit.

 

[joshril]

Either way I'm safe with my 6 and 63!

No we're not. I have my 6 and 63 licenses too, and the problem will be that you will have to sell these things through a B/D once the SEC get's their paws on them (which they will at some point).

This will mean lower commissions and more red tape. The Allianz/ABC thing was the first step at moving these thing into the SEC's hands... Sad...

 

[JMO Fan]

NASAA says FIA's are securities!!

SEC discussed EIAs by 1997 concept letter. They had said indexed products were outside the "safe harbor" back in 1986. This powerful group will push them hard:

NASAA Commends SEC for Advancing Equity Indexed Annuities Proposal
Tyler: “Shielding investors from the predatory sale of EIAs is one of the most important steps the SEC can take to advance the cause of Main Street investor protection.”
WASHINGTON, D.C. June 25, 2008—The North American Securities Administrators (NASAA) today commended the U.S. Securities and Exchange Commission (SEC) for issuing a rule proposal related to the classification of equity indexed annuities.
“This important proposal, as outlined at today’s SEC open meeting, would, if adopted, represent a significant step forward in the ongoing fight to protect investors, especially seniors, and we thank SEC Chairman Christopher Cox for his leadership on this issue,” said NASAA President and North Dakota Securities Commissioner Karen Tyler. “NASAA has long maintained that EIAs are securities and has urged the SEC to assert its jurisdiction over these products so that all investors who purchase EIAs can benefit from the strong protections afforded under the nation’s securities laws.”
... “We commend the SEC for moving forward with this proposal,” Tyler said, adding that NASAA looks forward to reviewing and commenting on the proposed rule. Tyler said the proposal, as described at the SEC’s open meeting today, “appears to remove the uncertainty that has surrounded the legal classification of equity indexed annuities for over a decade.” If adopted, Tyler said, “the proposal will subject these investment products to rigorous disclosure and suitability standards, and will deter abuse by exposing unscrupulous salespersons to strong sanctions under our securities laws.”
...
“Millions of investors across the country, many of them senior citizens, need protection from the fraud and abuse that is taking place in the sale of EIAs. We applaud Chairman Cox for his commitment to strengthening protections for EIA investors.”
The sale of equity indexed annuities has risen dramatically since 1995, when they first appeared on the market. As sales of EIAs have risen, state securities regulators, as well as the SEC and the SROs, have received an increasing number of complaints about EIAs. According to a recent NASAA enforcement survey, 34 percent of all cases of senior exploitation reported to state securities regulators involved variable or equity indexed annuities.
...Tyler said the proposed rule would serve to close a regulatory gap, which has proven to be particularly harmful to senior investors. EIAs have generally been regarded as exempt from regulation under a provision of the Securities Act of 1933. As a result, many investors have been subject to fraud and other misconduct in the offer and sale of EIAs without the protections that the securities laws normally afford.

NASAA Commends SEC for Advancing Equity Indexed Annuities Proposal - 6/26/2008 - insurancenewsnet.com

 

[bobson]

What a bunch of poppycock. They are in no way, shape, or form a security.

They are insurance products with guarenteed protections. They are no more risky than a standard fixed annuity. They just have more potential.

Big brother is alive and well. The FIA industry will die a rather quick death. This harms consumers way more than help.

 

[Winter_123]

Either way I'm safe with my 6 and 63!

Yeh but there are a lot of insurance folks here that think that all they have to do is get a securities license. They are not familiar with the whole bit about the B/D having to supervise and oversee all of your business even if it is not securities business and all of the compliance and approval hoopla that goes with that. You lose a lot of your freedom to do business when you have to put everything (including health insurance ads etc) through compliance departments, also known as the Sales Prevention Department.

Of course, this is not to say that it has been determined yet that a securities license will be required. The SEC can negotiate with the states to implement different rules, certification requirements etc, short of requirind a 6 or 7.

FWIW, I have my series 7 but still do not want to see indexed annuties treated like full securities. I dont have issue with the SEC putting some more rules in place or working with the states for uniformity. I just dont think it should require a full B/D relationship.

Winter