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October 05, 2005 at 08:00 PM
New York
The industry needs to stand up to the National Association of Securities Dealers in its efforts to regulate equity indexed annuities, according to a speaker at the annual meeting here of the National Association for Variable Annuities.
On Aug. 8, 2005, the NASD released a final version of its Notice to Members 05-50, which discusses the supervision of sales of unregistered EIAs.
The Securities and Exchange Commission has sent out a letter of inquiry to a variety of issuers of equity indexed annuities.
Criticizing the NASD, Joan Boros, a partner with Jorden Burt, Washington, told NAVA attendees, “We need a ‘no regulator left behind’ education initiative.” She added that the NASD has been “beaten back” before and that “it is possible to beat it back” again. Boros said she was offering her own opinion based on experience in the securities industry.
The NASD’s effort far exceeds its jurisdiction and makes incursions into permissible sales material, she said.
Non-registered EIAs are not regulated by the SEC and NASD, she explained, so this means that non-registered EIAs are not subject to the customer suitability, disclosure and sales practice requirements that registered securities are.
In the past, the NASD has tried to regulate group annuities and has been prevented by industry efforts, Boros noted. She said that if it starts looking at fixed annuities with the same vigor that it has variable annuities, then this segment of the industry is “in deep trouble.”
In fact, she cited comments made by Robert Glauber, CEO and chairman of the NASD, in which she said he discussed how investors could be well served. She told attendees that the Sept. 19 remarks included comments that “…to level the playing field, I think we need to look at fixed annuities, variable annuities, and equity indexed products, exchange traded funds and perhaps some other products, such as separately managed accounts, to ensure that investors are as well protected from abuses when they buy those as they are when they buy mutual funds.”
Until the NASD started looking at EIAs, the SEC did not have much impetus to look at the issue.
