A top official at the National Association of Securities Dealers says too many equity-indexed annuity sellers are portraying them as no-risk products.

Robert Glauber, chairman of the NASD, Washington, complained about the EIA sales process recently in Boca Raton, Fla., at a conference organized by the Securities Industry Association, New York.

“There are variable annuities, which are subject to NASD regulation; fixed annuities, which are subject to state insurance commissioners’ regulation; and equity-indexed annuities, which are subject to utterly ambiguous regulation because it isn’t entirely clear to anyone whether they’re insurance products or securities,” Glauber said.

“Yet all these products look pretty much the same to investors,” he continued. “EIAs are particularly complex. They are often marketed as risk-free, which they most certainly are not. And they are marketed disproportionately to elderly people, often without suitability analyses having been made. And sales commissions are as high as 10%.”

The NASD has proposed a set of rules to stop “this sort of irresponsible behavior in sales of variable annuities,” Glauber said.

The proposal includes requirements for a tailored suitability analysis and approval of any annuity sale by a principal of the selling broker’s firm, Glauber said.

“But we can’t touch all equity-indexed annuities sales, because they aren’t registered as securities and are often sold by non-broker-dealers,” Glauber said. “I think what we need to do here is invite the state insurance regulators to work with us on harmonizing and clarifying the rules for fixed and equity-indexed annuities sales. We’ve had some preliminary discussions with some of them toward that end, but we have a long way to go.”

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Robert Glauber, NASD chairman, said equity-indexed annuities “are subject to utterly ambiguous regulation because it isn’t entirely clear to anyone whether they’re insurance products or securities.”