NAFA To Oppose SEC Proposed Rule 151A
August 3, 2008
The National Association of Fixed Annuities (NAFA) announced its opposition to the Security & Exchange Commission’s proposed Rule 151A, which would regulate index annuities as securities rather than as insurance products.
In a July 11 release, NAFA said it “strongly disagrees with the SEC proposal and will pursue all available avenues of recourse,” noting that the SEC allows that “if the adopted rule is unsatisfactory to any party, the adopted rule may be challenged via the judicial system.”
NAFA said it would hire a public relations firm and a law firm “with established Washington contacts and demonstrated performance in insurance regulatory/legislative” matters and propose a “complete withdrawal” of Rule 151A.
The Milwaukee-based trade group said it would coordinate its activities with “state regulators, the American Council of Life Insurers, the National Association of Insurance Commissioners, the National Association of Insurance and Financial Advisors, the National Association of Independent Life Brokerage Agencies, the American Academy of Actuaries, and the Committee of Annuity Insurers.
Rule 151A, if adopted, would effectively block insurance agents without securities licenses from selling index annuities. The SEC invites public comment on the proposal until September 10, 2008. After that the agency’s commissioners will “vote on whether to adopt the rule as is, to adopt a revised version, or not to adopt it.” The rule would take affect one year after adoption.
Index annuities, also called equity-indexed annuities or fixed indexed annuities, are an amalgam of fixed income investments and equity index options. The bond portion offers downside protection while the options offer a chance for higher returns if the equity markets do well.
High commissions and long surrender periods on some index products and instances of inappropriate sales to the elderly have made index annuities a target of civil lawsuits and regulatory action in several states.
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