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!
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.
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.
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I thought this WAS a real job!
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...
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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.”
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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.
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
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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
They also don't understand the haircut that you take from your B/D on the commission when you run it through the grid.
Federal court decisions force these to be securities. The SEC put them outside the safe harbor over 20 years ago. They just took their time bringing the hammer down.
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.
You make a leap here that isn't obvious. Why does having these listed as securities (or more specifically, require some suitability testing) spell the death for FIA's?
No consumers were harmed in the making of this posting.
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
Dan,
The difference between VUL's, VA's and FIA's is the fact that on VUL's and VA's, the consumer bears the investment risk. Not so with FIA's. Additionally, with VUL's and VA's, the consumer is investing in equities. Not so with FIA's.
This has been said before, it's nothing more than the securities industry crying foul because billions of dollars are leaving securities every year to go to FIA's. They are tired of losing money. Having a securities license (which I have) does not mean that there won't be crooks out there selling FIA's. Just more red tape to sell them. And I don't sell that much of them. I just hate the fact that the government feels the need for more intrusion.
You make a leap here that isn't obvious. Why does having these listed as securities (or more specifically, require some suitability testing) spell the death for FIA's?
No consumers were harmed in the making of this posting.
Dan
Because of the licensing that will follow. I don't know if you ever had a series 6 and a B/D relationship but I can tell you they are anti-competitve. They will try to shut down your sales efforts. You have to run everything through their goons. Plus they will take a cut of the commission that they don't deserve to have.
In a nutshell, you will have very few insurance agents selling these fantastic products. If no one is selling them then no company will manufacture them. If nobody is manufacturing them then consumers have one less option for long-term savings.
Do you think registering FIAs will fix the problems in the industry? Everyone of the contracts I have sold has been through my insurance commissioner's office. I've not heard of many complaints in my state. If my commissioner thinks and insurance agent is causing problems that agent will be dealt with. I can't say the same for FINRA.
Do you expect FINRA to tell you what is a good life insurance product as well? How about car insurance, should FINRA be able to regulate that as well? I'm sure there unethical agents selling el-cheapo car insurance that when a serious wreck occurs the company writes a check for $25,000 and is done with it?
Where does it stop? Is UL next? CDs? Savings accounts? Whole life?
I was a Series 7 person for fifteen years and haven't lost a nights sleep after deciding to go 100% insurance (giving up 7 license).
I will lose sleep thinking, If I want to sell an FIA, about all the crap involved with the BD thing, more license fees and more E&O costs.
Sometimes the government and all its wonks make me feel like the rat in the maze. Constantly lost in a maze of BS.
Did the SEC stop the wall street gang from bundling / selling mortgages and creating a mortgage crisis? No. Did the SEC stop the wall street gang from dumping securities and creating a $trillion of open interest long positions in commodities? No. Hey ya like that $4 gas that the speculators have brought ya? Did the SEC stop the junk bond problem of the 80's? no. How about the people that lost $billions in the Dot Com bubble?
It is all about power and wall street is not at all happy about not having the FIA business all to themselves. Wall street has never been happy abuot independent BD's either and have made it their business to try to stamp ou independend BD's.
All that I can say is.....oh crap!!!!
Originally Posted by Winter
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.
Therefore I could make a case that an FIA paying a fixed interest rate should be registered. After all, the insurance company must invest in something to make that return.
If a traditional fixed return is not a registered product then it would be easy for the insurance company to sell an FIA based on the S&P, you just won't have any return options to choose from on each contract.
So contract A...........your fixed return will vary each year but is based on what the insurance company makes in the annual S&P
Contract B your fixed return will vary each year but is based on what the insurance company makes each month in S&P.
You need to consider that the traditional interest rate you get on an annuity needs to come from someplace. Is part of that interest from T-bills to bonds that the insurance company buys? If so...those are securities.
The only logical conclusion is not that the SEC has no problem with what or how an insurance makes money to pay on a FIA. It is that the big BD's that have a problem with the FIA's. They are losing money.
The entire securities market is about power. The State SEC people don't trust the Federal SEC people, etc. When I was a State registered RIA, my State SEC contact was always worried that the Feds were going to take away the jobs of State SEC people.
Until you understand the constant power struggle that goes on in the securities industry you will never understand those that have a healthy disdain for SEC registration. Another problem is that too many fingers in your pie make you work for slave wage commissions.
Are you ready to give 50% of your commission to some BD that is located 2,500 miles away form you? A BD that doesn't spend a dime of their money to market for you? Are you ready to not be allowed to hold a direct contract with an insurance company outside of your BD? Are you ready to only sell the FIA's that your BD has contracted to sell?
Originally Posted by JMO Fan
Federal court decisions force these to be securities. The SEC put them outside the safe harbor over 20 years ago. They just took their time bringing the hammer down.
.....The entire securities market is about power. The State SEC people don't trust the Federal SEC people, etc. When I was a State registered RIA, my State SEC contact was always worried that the Feds were going to take away the jobs of State SEC people.
Until you understand the constant power struggle that goes on in the securities industry you will never understand those that have a healthy disdain for SEC registration. Another problem is that too many fingers in your pie make you work for slave wage commissions.
Are you ready to give 50% of your commission to some BD that is located 2,500 miles away form you? A BD that doesn't spend a dime of their money to market for you? Are you ready to not be allowed to hold a direct contract with an insurance company outside of your BD? Are you ready to only sell the FIA's that your BD has contracted to sell?
This is absolutely correct! URDRWHO, sman, and bobson all understand what this is about. This is not about protecting senors it is a power grab by the SEC and FINRA. Protecting seniors is the justification. It is not in anyone's interest other than the SEC, FINRA, and B/D that FIAs be regulated as securities. It will drive the cost of doing business up for the agent and the insurance company. If the none RR agents on this site understood what was involved they would all be up in arms. This reminds me of the following:
"In Germany, they came first for the Communists, And I didn’t speak up because I wasn’t a Communist;
And then they came for the trade unionists, And I didn’t speak up because I wasn’t a trade unionist; And then they came for the Jews, And I didn’t speak up because I wasn’t a Jew; And then . . . they came for me . . . And by that time there was no one left to speak up." FINRA would love to regulate all insurance and investments and no insurance agent should ever want that to occur.
SEC says FIA's are securities!!
Re: SEC says FIA's are securities!!
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: 
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