July 3, 2008
Two reasons I believe Fixed Indexed Annuities should not be subject to SEC jurisdiction:
1) Fixed Indexed Annuities are insurance products with guaranteed cash values that are backed entirely by the assets of the insurance company. This would be a bad precedent, and may open the door for other fixed annuities, indexed certificates of deposit at banks, and other financial products that have traditionally not been subject to SEC oversight.
2) Fixed Indexed Annuities are under the supervision of state insurance departments, and these insurance departments are working diligently to enforce the suitability laws that exist in their state. For example, in Minnesota, Attorney General Lori Swanson has enforced Minnesotas suitability law by suing the four largest Indexed Annuity Insurance Companies. Wisconsin recently ousted Penn Life, fined them $925,000, and restored the policyholders assets. Florida just required a three hour continuing education course on suitable annuity sales and increased the penalties for non-compliance. I could name other recent actions in Iowa, Kansas, North Dakota, and Texas. Several companies have adopted our DataNet software platform that helps them supervise agent marketing materials, sales illustrations, financial calculators, presentations, documents, and brochures. The actions by state insurance commissioners prompted them to purchase this software months prior to this announcement by the SEC. In short, the states are doing their job, and they are doing it well.