July 10, 2008
Fixed Indexed Annuity (FIA) FACTS:
1. The FIA is a fixed product and people purchase the product for many of the same reasons people purchase savings instruments such as CD's or Fixed Annuities.
2. Unlike true security products, the purchaser is NOT directly impacted by market fluctuations. Negative investment risk fluctuation to the purchaser is eliminated entirely.
3. FIA purchasers assume the benefits and rewards of a Fixed Annuity. Market fluctuations DO NOT affect the principle value or the past interest credits.
4. Suitability regulations in most states and the sale practices required by insurance companies already meet or exceed the federal requirements. Complaint resolution through a department of insurance is much more effective than that provided in securities law. Rather than hiring an attorney and going to court, a consumer working with their local department of insurance receives direct representation at no cost.
5. The complaint rate on FIAs is one complaint for every $109 Million in sales according to the Advantage Compendium. Over the life of any annuity contract, the compensation is actually less than that of an investment advisor.
6. The SEC mentions case law regarding the evaluation of whether an FIA is a security but fails to mention the judges' findings. According to the judge, in Malone v. Addison Ins. Marketing, an FIA is NOT A SECURITY.
7. The SEC document states there will be increased competition by adopting this rule. This rule will reduce competition and harm consumers. If adopted, only consumers who open brokerage accounts may access an FIA.
8. Costs of creation and administration of the product will increase dramatically and reduce the value for FIA purchasers.
9. This change will cause a negative economic impact well in excess of $100 Million to small agencies within the insurance industry. This violates the Small Business Regulatory Enforcement Fairness Act of 1996.
10. The SEC is focused only on declaring products a security if the sales volume is significant. They fail to consider Indexed CDs or Indexed Universal Life in this rule. The SEC is being inappropriately influenced by securities dealers through their trade association (FINRA).
These dealers are seeking to gain control of additional sales volume to increase their revenue. This is clearly not about protecting consumers as those protections are already in place with each state department of insurance.
11. Consider this:
(A) Over $1 TRILLION in MARKET VALUE has been lost so far this year
(B) 35 of the 85 financial companies in the SP 500 have lost HALF their value
(C) The SP lost $150 BILLION on Monday alone
(D) NOT ONE PENNY HAS BEEN LOST IN A FIA IN THE SAME PERIOD OF TIME
(E)WHY? Because FIAs are FIXED INSURANCE PRODUCTS ...NOT SECURITIES