July 22, 2008
The SEC should not make the Fixed Index Annuity a security. I believe that the SEC and FINRA already have their hands full with their current jurisdictions. The State Departments of Insurance do a good job of policing any harm to consumers of index insurance products.
http://www.sec.gov/rules/concept/s72297/any22972.txt
"Executive Summary
EIIPs are best characterized as ordinary insurance products with a new way of calculating non-guarantied elements. Since most EIIPs are designed to be general account products, the investment risk for most EIIPs is assumed primarily by the insurer. The analysis of disintermediation risk shows that EIIPs are placing more risk on insurers than traditional insurance products."
For 15 years I was a Registered Representative. After my decision to not renew my NASD membership I spent two years as a State Registered Investment Advisor. I've held an insurance license for about 25 years. In all of my licensed positions I have never had one complaint, nor any marks against my licenses.
If someone thinks the Dateline show is indicative of a normal Fixed Index Annuity sale, I would consider it to be a very naive thought. The same show could be done by finding Registered Representative's misrepresenting Mutual Funds or other investment products that caused harm to consumers. There isn't a product available without bad actors. Bad actors will not change if fixed annuity jurisdiction is moved from State Insurance departments to the SEC / FINRA.
http://biz.yahoo.com/bizwk/080703/0828b4092000132397.html?.v=1
In my opinion this is about power, control and money. Wall Street has seen billions moved out of their hands. Those trying to make the Fixed Index Annuity their own product are busy planting bad or misleading information.
In my opinion, FINRA has some information on their site that is troubling and seems to be unclear.
http://www.finra.org/InvestorInformation/InvestorAlerts/AnnuitiesandInsurance/Equity-IndexedAnnuities-AComplexChoice/index.htm
"Is it possible to lose money in an EIA?
Yes. Many insurance companies only guarantee that you'll receive 90% of the premiums you paid, plus at least 3% interest. Therefore, if you don't receive any index-linked interest, you could lose money on your investment. "
Is the FINRA site trying to say, you are guaranteed to earn 3% on 90% of the premium paid? If so, they sure have a complex, unclear way of presenting it. It worries me that FINRA, the watchdog of the Registered Rep. that makes sure Reps dot their "i" and cross their "t" has such a confusing statement. I doubt if there is any current State Department of Insurance that would allow a fixed annuity to be sold in their State saying that you'll only receive 90% of the premiums you paid, plus 3% interest. I believe premiums in fixed annuities are completely protected and are normally 100% guaranteed.
Dateline program
I saw the Dateline program. Is Dateline's cut and edit presentation method now used to develop law? If so we as a society are in trouble. If I remember, wasn't there a gentleman (that may have been with a government entity) at the end of the Dateline show, who made a blanket statement about all CD's? His statement was (paraphrase here) "in a CD you can not lose any principal." I would suggest that the gentleman should visit the SEC site:
http://www.sec.gov/investor/pubs/certific.htm
The gentleman will find this on the site about losing some of the original deposit: "That means you would have to sell the CD at a discount and lose some of your original deposit #8211despite no "penalty" for early withdrawal."
There is much misinformation being transmitted, from Dateline to other entities, it all seems to point to something greater than consumer protection is at hand. Entities that support the idea of a Fixed Index Annuity as a security present clouded descriptions and definitions.
Perhaps the only way to find out who started this will be through the courts. I would love to ask the question to Dateline, "Who first approached you to do a show on FIA's?" Ask FINRA, et al., when were you first approached by someone from a brokerage about the problem with FIA's and how many others approached you about the problem" "Did they voice any financial concerns?"