This statement is very important and hopefully the insurers will push the SEC to define their position.
<The SEC does not discuss its views on whether there is a distinction between products linked to the performance of separate accounts and products backed by an insurer's general account.>
This statement shows the inherent lack of understanding of the non-existent risk (outside of the surrender charge) of an FIA.
<When a consumer buys an indexed annuity, "the purchaser assumes the risk of an uncertain and fluctuating financial instrument, in exchange for exposure to future, securities-linked returns," officials write. "The value of such an indexed annuity reflects the benefits and risks inherent in the securities market>
The future returns on any annuity are linked to securities returns. I don't think there is an insurer out there who doesn't have bills or bonds in their general fund. So if a traditional annuity return is based on future returns of bonds and bills, where is the distinction from the SEC that a traditional annuity shouldn't be registered.
I think the SEC has open Pandora's box on this one and a big cat fight is about to begin. Clark is on his way out and won't be involved in the fight. The SEC is painting itself into a corner. If they come out and say any return to a companies general fund, that is based on securities, be they bills; bonds; the S&P or whatever will force them to discuss its views on whether there is a distinction between products linked to the performance of separate accounts and products backed by an insurer's general account. If they come out and say there is no distinction an even bigger cat fight will begin. People may start to see that this is really an SEC / FINRA fight for power and not about consumer protection.
As of today I can sell unregistered 401K plans. If the SEC wins there will still be smart people that can get around them. There are a thousand and one ways to do it. So you make a few product changes and marketing changes and you have bypassed this problem.
<"Under these cases, factors that are important to a determination of an annuity's status under Section 3(a)(8) include (1) the allocation of investment risk between insurer and purchaser, and (2) the manner in which the annuity is marketed," officials write.>
<The SEC does not discuss its views on whether there is a distinction between products linked to the performance of separate accounts and products backed by an insurer's general account.>
This statement shows the inherent lack of understanding of the non-existent risk (outside of the surrender charge) of an FIA.
<When a consumer buys an indexed annuity, "the purchaser assumes the risk of an uncertain and fluctuating financial instrument, in exchange for exposure to future, securities-linked returns," officials write. "The value of such an indexed annuity reflects the benefits and risks inherent in the securities market>
The future returns on any annuity are linked to securities returns. I don't think there is an insurer out there who doesn't have bills or bonds in their general fund. So if a traditional annuity return is based on future returns of bonds and bills, where is the distinction from the SEC that a traditional annuity shouldn't be registered.
I think the SEC has open Pandora's box on this one and a big cat fight is about to begin. Clark is on his way out and won't be involved in the fight. The SEC is painting itself into a corner. If they come out and say any return to a companies general fund, that is based on securities, be they bills; bonds; the S&P or whatever will force them to discuss its views on whether there is a distinction between products linked to the performance of separate accounts and products backed by an insurer's general account. If they come out and say there is no distinction an even bigger cat fight will begin. People may start to see that this is really an SEC / FINRA fight for power and not about consumer protection.
As of today I can sell unregistered 401K plans. If the SEC wins there will still be smart people that can get around them. There are a thousand and one ways to do it. So you make a few product changes and marketing changes and you have bypassed this problem.
<"Under these cases, factors that are important to a determination of an annuity's status under Section 3(a)(8) include (1) the allocation of investment risk between insurer and purchaser, and (2) the manner in which the annuity is marketed," officials write.>
