September 8, 2008
There appears to be NO REASON why Fixed Index Annuity (FIA) products need to become registered products sold only through a broker-dealer and not by insurance agents. FIAs are CURRENTLY VERY WELL REGULATED by all of the state insurance departments throughout the United States, and sold by licensed insurance agents such as myself. Proposed rule 151A adds no consumer protections not already provided by state insurance regulation and would, in fact, undermine many state initiatives concerning sales practices.
The fixed index annuity is a product people purchase for the same reasons they place their money into savings instruments like bank CDs. But many FIAs offer even MORE advantages to the consumer than CDs like tax deferred accumulation, penalty free withdrawls, lifetime income option, just to name a few.
Consumers who own true securities are directly impacted by market fluctuations. This is NOT the case with the owners of FIAs. Negative investment risk fluctuation to the purchaser is eliminated. Market fluctuations do NOT affect principal value or past interest credits.
According to the judge in Malone v. Addison Insurance Marketing, an FIA is NOT a security.
Suitability regulations and the sale practices required by insurance companies, ALREADY MEET OR EXCEED federal requirements.
Further, costs to create and administer the product will increase dramatically and reduce the value for the purchasers of FIAs. The change will cause a negative impact on small agencies within the insurance industry. It violates the Small Business Regulatory Enforcement Fairness Act of 1996.
With the SEC focusing only on declaring products a security if the sales volume is significant, it fails to consider Indexed CDs or Indexed Universal Life in this rule. This creates the impression that the SEC is being unduly influenced by securities dealers through their trade association (FINRA). It appears that these dealers are seeking to gain control of additional sales volume to increase their own businesses, and the consumer be damned. This proposed rule 151A is clearly NOT about protecting the consumer, since those protections are already in place with each of the state departments of insurance.