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SEC 151A passes: What now?

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As you most likely know by now, on Dec. 17, U.S. Securities and Exchange Commission members voted 4-1 to pass Ruling 151A, a decision that could alter the way many of you in the financial services industry sell products.

Last week, we covered the ruling. In that article, Senior Market Advisor managing editor, Andy Stonehouse, wrote: “Commissioners acknowledged the tremendous public and industry feedback to the proposal – several thousand letters and submissions were sent to the SEC after the June 25 announcement of the proposed ruling – but say that 151A will provide better oversight and consumer protection for future sales of FIA products.”

We have received nearly 100 comments from advisors regarding 151A in the last week with the responses roughly 60-40 against the ruling.

In researching the decision, we’ve come across a variety of opinions from industry organizations. Following is a sampling of comments from those organizations and individuals.

  • After the ruling, NAIC quickly released its take. “We are extremely disappointed by today’s SEC decision,” NAIC Vice President and Iowa Insurance Commissioner Susan Voss said. “State insurance commissioners have taken active steps to protect consumers of equity-indexed annuities — and will continue to do so.”
  • Unkefer & Associates Inc., a Glendale, Ariz.-based opponent to 151A, tried to calm any advisor worries by saying: “If you desire to continue selling FIAs, simply stay right where you are. The fastest this process can happen is two years and there are elements already in play that will extend this period in our opinion. The worst thing you can do is run out and take your securities exam and fall into a Broker/Dealers supervision pre-maturely.”
  • “Regarding 151A, I am not surprised that the vote was 4-1. I, and many others, maintain that fixed index annuities are not securities simply because there is a likelihood of greater returns being credited to the accounts than the inherent guarantees. The notion that this vote was necessary due to blatant unprofessional sales practices and unsuitable placement by a few advisors and the necessity for further oversight is not valid. There is plenty of scrutiny and oversight by the offices of the insurance commissioners in each state where the advisor practices or holds a license. Furthermore, where is the scrutiny and outcry for the equities advisor who kept most of a senior’s [age 65 and beyond] money fully in the market and now that senior has lost in excess of 40% of assets? I am receiving calls from some of these people and they are devastated. That is heinous and tragic! Also, those of us who plan for the future for ourselves and our clients have confidence in knowing that we guarantee principal, provide growth and guaranteed income for life [without annuitization]. It is always about doing the right thing and helping to achieve the goals and objectives of the client.”
    — Stefanos Loisou, 2008 SMA Advisor of the Year finalist
  • “Since I am already licensed to handle variable annuities, I can go either way. My biggest concern with fixed and index annuities is that they don’t offer zero surrender charge or at least a 5,4,3% deferred charge. I don’t want to lock up my clients’ monies because as we have experienced these last 100 days so much can happen.”
    — Ron Nelson, financial advisor

If you have comments or questions about this ruling and how it affects you, use the form below. And, for the latest 151A news, sign up for Senior Market Advisor’s free Market Conduct & Suitability eNewsletter.


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