July 7, 2008
I am a licensed agent in North Carolina, and an inactive Registered Rep., and have been active for 25 years on the insurance side. EIAs or FIAs have been a valuable tool of mine for close to decade, without complaint. The proposed ruling will strand many customers because when the rule becomes effective, broker-dealers will have their own approved lists of insurance carriers and certainly will not allow Registered Representatives to represent all the companies they did in the past. Whereas the rule is to protect consumers, the exact opposite will happen. Furthermore many of us will lose many of our customers and this should not happen. Who will reimburse us? Also, to force insurance agents to enter into a system which is at best Orwellian, that of being a Registered Representative, in order to sell product, is surreal.
I was astonished that so much emphasis was put on the ABC Dateline episode concerning EIAs. Other annuities, ie Variable Annuities are sold in seminars also and regulated by FINRA, and the complaints have been and continue, I believe, to be numerous.
I have reason to believe complaints about EIAs have been paltry and I heard one report that last year there were only 248 nationwide. I would hope Messr. Cox, a man I admire greatly, would be a lot more scientific in his approach to this issue.
The bottom line is that although there would be some benefit in standardization, and methodologies in the EIA arena if regulated, the fact is that having so called supervision will do little other than add numerous forms to sign. The issue is now so overworked that insurance companies are doing a wonderful job negating so called wrongful transactions.
In closing, this is not rocket science. By 1999 enough information was available to the smart people of the SEC to make a decision that EIAs may have been securities. After a decade, it seems the trigger was a NBC news documentary. So therefore, the motives seem suspect.
In no communication I have seen any comment on positive aspects of these products. Instead I feel like they are permanently damaged, and have been thrown in the garbage heap of other failed products, like penny stocks or promissory notes.
A better solution would be to require a new SERIES test, allowing insurance agents to have limited authority to sell EIAs, similar to a Series 62.
Pass the rule, but do not disrupt customers and insurance agents.