September 18, 2008
I truly believe that this proposed rule has been rushed through the "process" without much consideration or giving the appropriate time for the appropriate response.
Fixed Index Annuities are insurance products, not securities. They have underlying guarantees built into them, so the consumer is not taking on any risk of their principal. Even to go further, there are many companies that not only protect the principal, but guarantee a 3% floor interest rate, regardless of the index performance, as long as the account is held to maturity.
No market risk, not a security, guarantee mimimal account values that include the principal premium plus interest.
I believe that one of the comments from the SEC was concerning commissions paid, and they were stating that they were "large" commissions. If you were to look at the upfront commissions paid on the typical index annuity and compare that to a variable annuity with fees ranging from 2-3% per year, the variable annuity is 2-3 times as costly as a index annuity. In addition, the variable annuity fees come from the consumer, the commissions on a fixed index annuity come from the company. If held to maturity, or if the consumer stays within the free annual withdrawal amount, there is no surrender charge to them.
I believe that the SEC sees the mass exodus from the market into safety, and is simply looking for a way to become part of that.
There is previous court rulings to follow, in which the SEC has made no reference to .
It is what is is - A FiXED index annuity is an insurance product, with the insurance company bearing the investment risk, not the consumer.