The National Association of Independent Life Brokerage Agencies, Fairfax, Va., recently issued a position statement opposing what it says is the National Association of Securities Dealers’ effort to “capture index annuity business by considering them subject to securities regulation.”
The association is speaking up because many of its member agencies are actively marketing index annuities, say leaders of the BGA group.
NAILBA’s position is that “these annuity products meet the Rule 151 safe harbor requirements of the provisions of section 3(a)(8) of the Securities Act of 1933 and are exempt from the Securities Act,” the statement says.
The NAILBA statement criticizes the NASD notice for defining index annuities in a way that is “somewhat misleading”–by implying that principal is at risk in unregistered index annuity contracts. The statement also faults the NASD for not providing a specific set of circumstances that, in the NASD’s opinion, would cause an index annuity to be considered a security.
The National Association of Insurance and Financial Advisors, Falls Church, Va., also has issued a statement voicing great concern about the NTM.
NAIFA’s concern is that the NASD “has overstepped its authority by urging its member broker-dealers to, in effect, treat EIAs as securities and supervise EIA transactions by their registered reps as private securities transactions under NASD Rule 3040. This is in spite of the fact that no entity with valid authority–meaning the Congress, the SEC or the courts–has determined that EIAs are securities.”
NAIFA suggests that adopting the annuity disclosure and sales practices model regulations of National Association of Insurance Commissioners would be a better approach to dealing with sales issues.
It also suggests enforcement of existing state unfair trade practices acts and other state laws on advertising and marketing practices.
The National Association for Fixed Annuities, Milwaukee, Wis., emphasizes that the NASD “is the only organization creating the controversy with the Notice to Members 05-50.”
In a “perspective” published in the trade group’s Fall/Winter online newsletter, NAFA points out that neither the NAIC nor the SEC has acted on the NTM. In addition, the perspective stresses that the “NASD has issued a notice, not a rule, as it would be beyond their purview to declare indexed annuities to be securities.”