Wednesday, June 25, 2008
For several years regulators, in particular NASAA, have raised the alarm about abusive sales practices used in the marketing of equity-indexed annuities to investors, particularly senior citizens, for whom this product may be unsuitable. EIAs are a complex hybrid of insurance and securities that are difficult to understand and involve high fees, particularly high surrender charges. An unresolved issue is whether EIAs are securities under the federal securities laws. The SEC has proposed a new rule that would establish — on a prospective basis — the standards for determining when equity indexed annuities are not considered annuity contracts under the Securities Act of 1933 and therefore are securities and thus are subject to the investor protections afforded by the securities laws.