The insurance industry should stand up to efforts by the National Association of Securities Dealers to regulate equity-indexed annuities.[@@]

Joan Boros, a partner at Jorden Burt L.L.P., Washington, delivered that message here at the annual meeting of the National Association of Variable Annuities, Falls Church, Va.

The NASD, Washington, released a notice in August that discusses supervision of EIA sales, and the U.S. Securities and Exchange Commission has sent out a letter of inquiry to a variety of EIA issuers.

Boros, who emphasized that she was offering her own opinion, declared that EIA issuers need a “no regulator left behind” education initiative to bring regulators up to speed on the EIA market.

The NASD has been “beaten back” before and “it is possible to beat it back” again, Boros said.

The NASD’s current EIA regulatory effort far exceeds the NASD’s jurisdiction and makes incursions into permissible sales material, Boros said.

Non-registered EIAs are not regulated by the SEC and NASD, and that means that non-registered EIAs are not subject to the same customer suitability, disclosure, and sales practice requirements imposed on registered securities, Boros said.

In the past, the NASD has tried to regulate group annuities and been prevented by industry efforts, Boros noted.

If the NASD starts looking at fixed annuities as vigorously as it has looked at variable annuities, then this segment of the industry is “in deep trouble,” Boros warned.

Boros added that NASD scrutiny of EIAs is causing the SEC to take a closer look at the products.

The SEC could come up with new rules, expand existing rules to cover EIA products, decide to take no action, or bring a “poster child” enforcement action against one EIA issuer based on specific provisions of a specific EIA contract rather on broad issues, Boros said.

Contract features that could lead to an examination could include aggressive shifting of investment risk and low secondary guarantees, Boros said.