A strong debate over who should oversee equity indexed annuity products has been going on since the SEC introduced Rule 151A in 2008. According to Investment News’ “Indexed-annuities amendment: Insurers yea, advisers nay” by Mark Schoeff Jr. and Darla Mercado, the debate between sides will remain even if this amendment makes a final decision. Regulation of equity indexed annuities will remain in the control of individual states if the bill passes, instead of transferring to the SEC as they had hoped. The products will be classified as insurance products rather than securities.
Insurers are happy that the annuities will remain out of the hands of the SEC, while advisers would have preferred the latter. Allianz Life, the National Association of Fixed Annuities, and the National Association of Insurance Commissioners support the bill keeping the regulation of equity indexed annuity products at the level of the state insurance commissioners. While Democratic leaders hoped that the products would be regulated by the SEC, most rank and file Democrats voted with Republicans that the control should remain with state insurance commissioners.
The advisers who don’t agree with this bill believe that consumer protection against abusive sales representatives targeting vulnerable people will be compromised. They believe that FINRA and members of the broker-dealer world have more knowledge to regulate a product tied to securities. Because of past problems with equity indexed annuities, the National Association of Insurance Commissioners has put new suitability standards on the products believing that will help get rid of shady sellers. There is also a concern in the government that taking away the state regulation of these products will force smaller insurance companies and individual agents out of business, leading to increased unemployment. The debate rages on until the final bill is signed by the President.