The National Association of Securities Dealers has released a long-awaited discussion about when securities dealers should treat equity indexed annuities as securities rather than as life insurance products.[@@]
The NASD stopped short in the new guidance of defining exactly when an EIA is an insurance product, but it emphasized that broker-dealers must take it on themselves to police sales of EIAs by their own representatives.
EIAs are annuities that guarantee a minimum crediting rate and also give investors the chance to share in the gains in a stock market index or other investment index.
Broker-dealers should supervise the sale of EIAs by their associates to assure that they are marketed correctly, NASD officials write in the new guidance.
“Investors may assume mistakenly that EIAs provide the same returns as an index mutual fund,” NASD officials write.