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The Harkin Amendment seems more definite than the court ruling, as its reported intent is to leave fixed indexed annuity (FIA) regulation to the state insurance departments (which might still become a point of contention with some state securities departments). It is part of the federal financial reform package that Congress passed. It isn't clear whether that will answer the following questions:
1) The Harkin Amendment says these products (indexed & MVA, both life and annuities) are to be "treated" as exempt securities. This seems to exempt them from SEC registration, but does it exempt them from other securities laws?
Remember that the federal court that originally delayed 151a said that the SEC was correct in classifying FIAs as securities. Several consumers have sued FIA sellers in the past for securities violations. State insurance department regulation of FIAs might not preclude consumer lawsuits.
2) If Harkin Amendment does allow SEC to classify some FIAs as securities (e.g., if they do not pass all the nonforfeiture tests or are issued where the state hasn't updated its suitability laws), does FINRA 05-50 still apply? https://www.finra.org/web/idcplg?Idc...s/2005/P014820
3) Some early 1990s FIAs were in separate accounts.
Could some FIAs be required to be in separate accounts? This would force states to require variable (i.e., Series 6/63) insurance licenses; companies would need variable licenses, too.
4) The Harkin Amendment only extends to indexed UL and annuities if they are issued in states with NAIC-model suitability requirements (as well as comply with Standard Nonforfeiture Law requirements). Updated suitability rules will have to be adopted in many states to qualify for this exemption. Is it clear that FIAs and MVAs are SEC-exempt when issued under NY laws (which are quite different from NAIC model laws)?
1) The Harkin Amendment says these products (indexed & MVA, both life and annuities) are to be "treated" as exempt securities. This seems to exempt them from SEC registration, but does it exempt them from other securities laws?
Remember that the federal court that originally delayed 151a said that the SEC was correct in classifying FIAs as securities. Several consumers have sued FIA sellers in the past for securities violations. State insurance department regulation of FIAs might not preclude consumer lawsuits.
2) If Harkin Amendment does allow SEC to classify some FIAs as securities (e.g., if they do not pass all the nonforfeiture tests or are issued where the state hasn't updated its suitability laws), does FINRA 05-50 still apply? https://www.finra.org/web/idcplg?Idc...s/2005/P014820
3) Some early 1990s FIAs were in separate accounts.
Could some FIAs be required to be in separate accounts? This would force states to require variable (i.e., Series 6/63) insurance licenses; companies would need variable licenses, too.
4) The Harkin Amendment only extends to indexed UL and annuities if they are issued in states with NAIC-model suitability requirements (as well as comply with Standard Nonforfeiture Law requirements). Updated suitability rules will have to be adopted in many states to qualify for this exemption. Is it clear that FIAs and MVAs are SEC-exempt when issued under NY laws (which are quite different from NAIC model laws)?
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