Top 10 Reasons the SEC is Wrong

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What's Happening & What Does It Mean

The Securities and Exchange Commission (SEC) is proposing a rule now known as 151A that if adopted, would make Fixed Indexed Annuities a registered security.  Please note:  This is only a proposed rule.  It has not been adopted and therefore, no action is needed by you at this time.  You may continue selling Indexed Annuities without a securities license.

The rule is essentially looking at two tests to evaluate if an Indexed Annuity product would be considered a security. 

  1. the amounts payable are calculated in whole or in part by reference to a security or a group of securities or an index, and
  2. the amounts payable by the insurer are more likely than not to exceed the amounts guaranteed under the contract ("more-likely-than-not" test).

As you can see, the language is sufficiently vague so that it might be adapted to various versions of product.

The first test certainly affects all indexed annuities as amounts payable are calculated in whole or in part by reference to an index.

It is interesting to note that the second test likely affects all annuities because all fixed annuities are designed to exceed the legal guaranteed minimum.

Now here is an important point; to be considered a security under this rule a product must meet both tests. 

Again, we want to stress to you that this is a proposed rule at this point, not an adopted rule.  Prior to adopting a rule, the SEC will follow their prescribed process.

The entire language of the proposed rule has been released for public comment back to the SEC.  The public comment period closes on September 10, 2008.  This allows anyone interested to submit their opinions on whether this rule should be adopted or rejected.  As you navigate this website, you will see how you can immediately post your comments to the SEC.  We have even provided you with suggested language you may find useful in helping you compose your thoughts.

Once the public comment period is closed, the SEC will deliberate over the comments and then vote to adopt or reject the proposed rule.  They may also consider modifying or tabling this topic as well.

Should the SEC adopt the rule, immediate compliance is NOT required.  There is a 12 month period after the adoption of the rule to allow companies and agents to move toward compliance.  In other words, for the 12 months following adoption, agents, agencies and wholesalers may continue to operate as they currently do without violating the rule.  So, even if the rule were adopted today for example, you would have 12 months before you would be required to actually execute any changes.

We have received word from several insurance companies that they are prepared to file suit against this proposed rule should the SEC choose to adopt it.  Based on past case law and existing safe harbor rules, we believe there is an excellent opportunity to prove that a Fixed Indexed Annuity is NOT a security.  So, even if the rule is adopted by the SEC, it could be overturned in a legal proceeding.   

You may be wondering how things will change in the event that the rule is adopted and remains in force.  Those wishing to stay involved with Indexed Annuity sales would need to become securities licensed at that time.  It may also impact certain business models that do not match up well with securities regulations. 

We will be consulting with the legal experts and industry leaders to keep you apprised of the situation as it progresses as well as identify options you may need to consider in the future.  Just visit this site on a regular basis or register and we will notify you when anything changes on this important issue. 

If you would like to be included in any future communication regarding this mission critical topic, please register today by completing all the information requested on the right side of this web page.  Then, click the submit button.  We will be updating you each step of the way.

Today, it is business as usual but we must begin to keep a watchful eye on the horizon so that we can restructure where necessary to continue serving every consumer in an honorable and professional manner.