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Proposed SEC Rule 151A................
Old 07-01-2008, 03:41 PM   #1
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Proposed SEC Rule 151A................

The SEC is coming under fire from the insurance industry regarding proposed rule 151A, which would REQUIRE such contracts to be registered as SECURITIES, making them subject to more stringent securities laws rather..............

The insurance industry is NOT happy with this, because currently they can sell fixed index annuities and equity indexed annuities with only an insurance license. Classifying them as securities would mean the agents would have to pass at least a Series 6 license, and need extra CE credits, along with a lot more compliance standards.

Maybe the Dateline expose on EIAs did have some clout.........
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Old 07-01-2008, 03:49 PM   #2
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Well that's going to hurt the ol' bonus pool.
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Old 07-01-2008, 04:29 PM   #3
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Heh, death to the EIA bastids!

No doubt the same product will surface elsewhere as it has for many years (structured notes, indexed CDs, etc.). There is a sucker born every minute, after all.

Wonder if this impacts equity indexed universal life policies?
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Old 07-02-2008, 10:19 AM   #4
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Well that's going to hurt the ol' bonus pool.
It might, but don't count the industry lobbyists out.........they are a pretty strong lobby........

I still submit there are more shady practices in life insurance products than security products, insurance has almost no regulation compared to securities...........
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Old 07-02-2008, 10:24 AM   #5
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Well, I may be wrong, I've been told that most of our agents already have their Series 6 or Series 7 licenses. I guess that means they're just as trustworthy as anyone else ;-)
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Old 07-02-2008, 10:29 AM   #6
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Well, I may be wrong, I've been told that most of our agents already have their Series 6 or Series 7 licenses. I guess that means they're just as trustworthy as anyone else ;-)
They have to have a Series 6 to sell VAs, and your company is a big VA player, so that makes sense.

However, a LOT of agents have no Series 6 or 7, and having one doesn't make you any more trustworthy than not having one...........
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Old 07-02-2008, 10:36 AM   #7
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On the fixed side, we've been moving into buying FMOs and building our captive agent base. However, I always thought that one of the draws for having independant agents is that the carrier can say "hey, we didn't sell a bad product, it's up the FMO to ensure their agents are checking suitability". Recent lawsuits, media coverage, and now legislation leads me to believe that no one's buying that argument any more.
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Old 07-02-2008, 10:38 AM   #8
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On the fixed side, we've been moving into buying FMOs and building our captive agent base. However, I always thought that one of the draws for having independant agents is that the carrier can say "hey, we didn't sell a bad product, it's up the FMO to ensure their agents are checking suitability". Recent lawsuits, media coverage, and now legislation leads me to believe that no one's buying that argument any more.
Depends on who you ask, but its pretty clear to me that simply having an independent agent force does not give you plausible deniability.
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Old 07-02-2008, 01:28 PM   #9
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On the fixed side, we've been moving into buying FMOs and building our captive agent base. However, I always thought that one of the draws for having independant agents is that the carrier can say "hey, we didn't sell a bad product, it's up the FMO to ensure their agents are checking suitability". Recent lawsuits, media coverage, and now legislation leads me to believe that no one's buying that argument any more.
In MANY lawsuits lately, the courts AREN'T buying the "rogue agent" scenario, they are looking hard at the insurer or the agency that hired said rogue agent.

Saying an equity indexed annuity or fixed index annuity should NOT be considered a security is BS. if the potential gain to the client involves an index,even though the client doesn't get the full risk associated, but a "participation rate ratio" it's a security. Fixed annuities are different..........they are NOT linked to an index, per se.........
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Old 07-02-2008, 04:36 PM   #10
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Saying an equity indexed annuity or fixed index annuity should NOT be considered a security is BS. if the potential gain to the client involves an index,even though the client doesn't get the full risk associated, but a "participation rate ratio" it's a security. Fixed annuities are different..........they are NOT linked to an index, per se.........
I agree a fix annuity seems to me to be type of insurance. A VA or EIA is an investment, as Brewer showed a while ago you can replicate EIA with options and bonds. There is no way to replicate a fixed annuity with securities.
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Old 07-02-2008, 05:52 PM   #11
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The SEC is coming under fire from the insurance industry regarding proposed rule 151A, which would REQUIRE such contracts to be registered as SECURITIES, making them subject to more stringent securities laws rather..............
Gosh, where's Harvey Pitt when the industry needs him?!?

I guess that the SEC is to blame for the high cost of annuities. They're probably responsible for the high costs of mutual funds and oil, too...
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Old 07-02-2008, 06:08 PM   #12
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Gosh, where's Harvey Pitt when the industry needs him?!?


Quote:
I guess that the SEC is to blame for the high cost of annuities. They're probably responsible for the high costs of mutual funds and oil, too...
Haven't you heard? The high cost of annuities is GWB's fault, too...........
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Old 07-02-2008, 09:36 PM   #13
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Sorry guys, the high cost of annuities is directly attributable to my salary, the bonus pool at corporate, and the agent's commission.

I'm tempted to buy an annuity too, but only because I get the full commission paid into my annuity. I'm a little worried about carrier risk, though.
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Old 07-03-2008, 03:07 AM   #14
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The insurance industry is regulated. If an agent sells mutual funds, they have to have an NASD Series 6, but they can sell an EIA or some hybrid UL product that has funds under it without the Series 6 license.

I think they should be licensed to sell those types of products... They are not pure insurance products, they are investments.
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Old 07-03-2008, 08:46 AM   #15
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The insurance industry is regulated. If an agent sells mutual funds, they have to have an NASD Series 6, but they can sell an EIA or some hybrid UL product that has funds under it without the Series 6 license.
Which is BS, and needs to change........

Quote:
I think they should be licensed to sell those types of products... They are not pure insurance products, they are investments.
I went to a local seminar about EIA because I got the dinner tickets in the mail. The guy running it was quite the smooth operator. At the end of the seminar, they had an open Q&A period. Let's just say the questions I asked were NOT well received by "seminar boy"..........
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