Under whose rule

[URDRWHO]

To those that think I am out of my mind when I speak about the SEC and FINRA wanting to take over insurance, take heed to one SEC commenter. Is the commenter alone in his thought? For some reason I don't think so.

Comments of R. Ow on S7-14-08
"Additionally, I believe that all life insurance agents and all life insurance companies should be held accountable under SEC regulations. Regulating indexed annuities is a good start."

 

[Mr. Bill]

Well, I, for one, appreciate your keeping up on this stuff. I'm in agreement with you. The SEC has enough crap on its hands already to be bothering with FIAs!!!

 

[moonlightandmargaritas]

My question to 'ole Bob would be this: with all the rules/regulations currently are on the state level, why hasn't it stopped the abuse? What makes you think the federal government can do any better?

Not sure about this guy, but a LOT of these guys are lawyers who think they were put on earth to enact legislation to save us from ourselves.

 

[JMO Fan]

FINRA seems to be dragging SEC into this. The proposed SEC rule leaves much reporting and regulation to the states, which is unprecedented. They have no staff, skills, or support for insurance regulation.

 

[xrac]

This all about money and power. FINRA and the SEC want it because it gives them more power, more staff, bigger budgets, and more clout. The broker dealers want it so they can get their cut of the non security pie.

 

[patch36]

It is about money. Securities firms see the billions of dollars they are missing. They know that their negativity towards the product falls short of the facts, and they want their piece of the pie. Actually they want the whole pie.

In some ways I see legitimacy in securities regulation of Index Annuities, but it is not as if FINRA or the SEC does a good job of regulating their members or the suitability of the products they sell, so in the end it is more regulation and paperwork without positive results for the consumer.

I am securities licensed. I sell no securities products, but in truth Index Annuities have danced around the securities designations when by description in many opinions they are nothing more than a disguised security. I am sick of the agents who inappropriately sell them. Huge marketing groups send out agents who are not well versed or licensed to give financial advice and spew out just that with all kinds of semantics intended to keep them out of trouble.

 

[URDRWHO]

If you don't sell any securities, has FINRA relaxed on the non producing? About 10 years ago the NASD was snorting about making rules about parking a license without producing.

I have a sneaky suspicion this will all be settled in the courts.

Are Equity-Indexed Annuities Considered Securities?
Malone v. Addison Ins. Marketing, (W.D. Ky 2002)
"For all these reasons, the Court finds Plaintiff's American Equity contracts are more like "fixed annuities" and therefore are excluded from the definition of "security" under the Supreme Court's opinions in VALIC and United Benefit."

It is about money. Securities firms see the billions of dollars they are missing. They know that their negativity towards the product falls short of the facts, and they want their piece of the pie. Actually they want the whole pie.

In some ways I see legitimacy in securities regulation of Index Annuities, but it is not as if FINRA or the SEC does a good job of regulating their members or the suitability of the products they sell, so in the end it is more regulation and paperwork without positive results for the consumer.

I am securities licensed. I sell no securities products, but in truth Index Annuities have danced around the securities designations when by description in many opinions they are nothing more than a disguised security. I am sick of the agents who inappropriately sell them. Huge marketing groups send out agents who are not well versed or licensed to give financial advice and spew out just that with all kinds of semantics intended to keep them out of trouble.

 

[Crabcake Johnny]

It is about money. Securities firms see the billions of dollars they are missing. .

What am I missing? Securities firms can't make a deal with insurance carriers to also offer annuities? Get their broker's life licensed?

I don't see this as the issue. If I was running a brokerage and wanted my reps to sell annuities is there any regulation that doesn't allow me to do so?

 

[URDRWHO]

Have you ever been securities licensed?

There is a lot of expenses involved in running a BD and being a Reg Rep. In a previous post I mentioned this: years ago the NASD was trying to get passed that you had to produce "X" amount of commissions a year to keep your license. Plus a BD doesn't want you hanging around to sell a couple FIA's once in a while.

Let's say you are working for an insurance agency as their L&H producer. You sell some FIA's each year and the agency takes a cut of your commission. Then let's say FIA's become securities. How will the commission arrangement work? The BD will want their 50%, the agency will want its cut, what does that leave you? If you are the only one licensed is the agency owner willing to set-up compliance for a BD office. Is the agency owner willing to take on the risk, the extra E&O, etc.

Remember you are already working for an insurance agency. Who must contract with the BD? You, the agency or both. If it is the agency then they may also need to have a Principal on staff. Who will that be? Who will the in house securities compliance officer be? Because securities records must be segregated, where will securities records be stored? Can a non security receptionist help with a securities client?

If you think a wire house is going to let you sell a few FIA's for them at an off site office......you are dreaming a bit. Insurance company BD's are more inclined to take you but unlike in the 1980's when insurance company BD's were a growing trend, insurance company BD's have been on the down trend. Let's say that Allianz becomes your BD. Do you think for one minute they will have an agreement with American Equity to sell their stuff? I don't think so!

Since I was once a State licensed RIA, If I wanted, I could get that back and do RIA stuff. They don't have the 2 year license rule like FINRA. When setting up my ADV When initially setting up my ADV I talked with some people in my State Security Commission office. I was setting my fee at $125 an hour and the State Securities Commission office said I was cheap. To me, $125 an hour sounded high!

Apparently you are missing a lot.

What am I missing? Securities firms can't make a deal with insurance carriers to also offer annuities? Get their broker's life licensed?

I don't see this as the issue. If I was running a brokerage and wanted my reps to sell annuities is there any regulation that doesn't allow me to do so?

 

[Crabcake Johnny]

Gotcha! Great post - didn't understand the relationship but that was well laid out.