June 29, 2008
I read with both amazement and chagrin that now, after $123 Billion worth of horses have left the barn, the SEC proposes to close the gate by making Equity Index Annuities securities. A soon-to-be registered product--that will still exempt the issuer from registration--will now subject agents and their managers affiliated with broker/dealers to suitability and other concepts of legitimate securities sales. The problem is, EIA products were designed to circumvent these concepts.
Have you asked anyone why EIA's were created in the first place? Did they tell you it was to allow insurance agents to pretend they were competent financial advisers? And say cool, sexy things like "SP 500" and "guaranteed" in the same sentence?
When it comes to suitability, insurance agents think if a person can fog a mirror he's suitable for an insurance policy. This proposal is the 21st century financial-services equivalent of inviting Vandals and Visigoths to a tea party. They won't just break the crockery.
No, registering bad insurance product as a security won't solve your problem. How about banning the issuance of EIA's--and anything else that masquerades as a security? But then the insurance-industry's lobby would work overtime to get you replaced.
Better that than having a couple of million insurance agents running around with a shiny new securities license. You will make them all get a license, won't you? Or is this only going to apply to the ones who already have a securities license? How uneven a playing field do you want?