NAILBA: Fixed indexed annuities not securities

The National Association of Independent Life Brokerage Agencies has announced its opposition to the Securities and Exchange Commission’s regulation of fixed indexed annuities as securities. A key provision in proposed Rule 151A states that annuitants bear the majority of the investment risk if they are likely to receive payments that exceed the guaranteed payment within an FIA. The risk in this case is that the gain in the annuity contract will be higher than the guaranteed floor within the annuity but subject to a cap and therefore lower than some higher number. NAILBA asserted that this risk isn’t the same as what investors find in mutual funds and other securities, so these annuities shouldn’t be regulated as securities “The decision to purchase an FIA is frequently rooted in the desire to put money into a guaranteed-savings vehicle that is protected from loss,” the Fairfax, Va.-based organization said in a statement. “NAILBA objects to the idea that simply because the potential interest credit on an FIA is tied in part to a security or index, it should be considered a security.” NAILBA also said that the SEC would be compromising consumer choice by regulating FIAs as securities, as well as keeping salespeople who aren’t securities licensed from competing in the financial services world.