SEC Publishes Proposed Rule 151A Under the Securities Act of 1933 - Clarifying Under What Circumstances an EIA Constitutes an Annuity or Security
For those following the regulation of equity indexed annuities (also known as EIAs or fixed indexed annuities), the U.S. Securities and Exchange Commission ("SEC") has now posted to its website proposed Rule 151A under the Securities Act of 1933.
This 96 page proposed rule release provides background and details to the SEC proposal to clarify whether an equity indexed annuity constitutes a security under federal law. If adopted as proposed, Rule 151A would drastically change the regulatory licenses necessary for insurance agents to offer EIAs falling under the clarified definition of an annuity/security.
Insurance marketing organizations and insurance agents offering EIAs need to carefully review this proposed rule. The SEC is accepting public comments regarding proposed Rule 151A until September 10, 2008.
This 96 page proposed rule release provides background and details to the SEC proposal to clarify whether an equity indexed annuity constitutes a security under federal law. If adopted as proposed, Rule 151A would drastically change the regulatory licenses necessary for insurance agents to offer EIAs falling under the clarified definition of an annuity/security.
Insurance marketing organizations and insurance agents offering EIAs need to carefully review this proposed rule. The SEC is accepting public comments regarding proposed Rule 151A until September 10, 2008.
Labels: Equity-Indexed Annuities
posted by bhill at 10:13 PM
SEC Proposing Rule for Determining When Equity Indexed Annuities (EIA) Are Securities
At today's open meeting of the Commissioners of the U.S. Securities and Exchange Commission ("SEC"), it was announced by Chairman Christopher Cox that the SEC is proposing a rule that would establish "...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." The proposed rule has yet to be posted on the SEC's website; however, RIA Compliance Consultants will prepare and post to its blog a summary of the SEC's proposed EIA rule once available.
Labels: Equity-Indexed Annuities
posted by bhill at 9:11 PM
SEC Chair Previews Results of "Free Lunch" Seminar Exams
During recent testimony before the U.S. Senate's Special Committee on Aging, United States Securities and Exchange Commission ("SEC") Chairman Christopher Cox offered a preview of the results from the SEC's targeted exams of financial firms that sponsor "free lunch" seminars in advance of the full release next week at the SEC's "Senior Summit". The following is an excerpt of SEC Chairman Cox's comments regarding the SEC's "free lunch" seminar exam findings:
But even at this point it is clear that we were right to identify these "free lunch" sales seminars as posing serious risks to senior investors. Many of the advertisements and mailers used to solicit seniors to attend these events were confusing or misleading about the intent of the event. Our examinations have found that, despite being advertised as "educational" or touting "nothing will be sold," the purpose of these seminars is to convince attendees to open new accounts with the sponsoring firm – and ultimately, to sell financial products to seniors.
Based on this insight, RIA Compliance Consultants would recommend that financial professionals immediately consider deleting terms and descriptions such as "educational" or "nothing will be sold" from the marketing materials promoting seminars or actual seminar presentations. Moreover, financial professionals that conduct seminars focused upon seniors should carve out time next week to review the complete results of the SEC target examinations of sponsors of "free lunch" seminars since this report will undoubtedly be used as guide by securities regulators for areas of further scrutiny.
If your firm needs guidance with respect to ensuring its sales literature and advertising is in compliance with the requirements of an investment adviser under state or federal law, please contact RIA Compliance Consultants at 877-345-4034.
But even at this point it is clear that we were right to identify these "free lunch" sales seminars as posing serious risks to senior investors. Many of the advertisements and mailers used to solicit seniors to attend these events were confusing or misleading about the intent of the event. Our examinations have found that, despite being advertised as "educational" or touting "nothing will be sold," the purpose of these seminars is to convince attendees to open new accounts with the sponsoring firm – and ultimately, to sell financial products to seniors.
Based on this insight, RIA Compliance Consultants would recommend that financial professionals immediately consider deleting terms and descriptions such as "educational" or "nothing will be sold" from the marketing materials promoting seminars or actual seminar presentations. Moreover, financial professionals that conduct seminars focused upon seniors should carve out time next week to review the complete results of the SEC target examinations of sponsors of "free lunch" seminars since this report will undoubtedly be used as guide by securities regulators for areas of further scrutiny.
If your firm needs guidance with respect to ensuring its sales literature and advertising is in compliance with the requirements of an investment adviser under state or federal law, please contact RIA Compliance Consultants at 877-345-4034.
Labels: Advertising, Equity-Indexed Annuities, SEC
posted by bhill at 10:15 PM
Senate Hearing Scheduled Regarding “Free Lunch” Seminars for Seniors & Professional Designations
The United States Senate Special Committee on Aging will hold a hearing entitled as "Advising Seniors About Their Money: Who Is Qualified - and Who Is Not?” on Wednesday, September 5, 2007 at 2:00 p.m. EST. If interested in hearing the webcast, you should visit the website of the Special Committee on Aging.
Joseph P. Borg, the North American Securities Administrators Association (“NASAA”) President and Alabama Securities Commission Director, will testify as to the efforts by state securities administrators to regulate “free lunch” seminars for seniors and the use of professional designations implying special expertise with seniors.
It has been RIA Compliance Consultants’ experience that this focus by state securities regulators on “free lunch” seminars and professional designations has also translated into scrutiny by state regulators as to whether an individual only licensed as an insurance agent (with no securities licenses) selling equity indexed annuities can discuss securities markets in general or encourage the liquidation of securities to prospective or existing insurance clients. Many state securities regulators have concluded that such activity by an insurance only agent constitutes acting as an unregistered investment advisor in violation of the state securities act.
If you are an agent that is only insurance licensed and would like help in avoiding allegations that you are acting as an unregistered investment adviser, please contact RIA Compliance Consultants at 877-345-4034.
Joseph P. Borg, the North American Securities Administrators Association (“NASAA”) President and Alabama Securities Commission Director, will testify as to the efforts by state securities administrators to regulate “free lunch” seminars for seniors and the use of professional designations implying special expertise with seniors.
It has been RIA Compliance Consultants’ experience that this focus by state securities regulators on “free lunch” seminars and professional designations has also translated into scrutiny by state regulators as to whether an individual only licensed as an insurance agent (with no securities licenses) selling equity indexed annuities can discuss securities markets in general or encourage the liquidation of securities to prospective or existing insurance clients. Many state securities regulators have concluded that such activity by an insurance only agent constitutes acting as an unregistered investment advisor in violation of the state securities act.
If you are an agent that is only insurance licensed and would like help in avoiding allegations that you are acting as an unregistered investment adviser, please contact RIA Compliance Consultants at 877-345-4034.
Labels: Advertising, Equity-Indexed Annuities
posted by bhill at 9:52 PM
U.S. Senate Investigating Sales Tactics and Credentials Focused Upon Seniors
It was recently reported by Investment News that U.S. Senate Special Committee on Aging has launched an investigation regarding certain controversial sales tactics and credentials focused upon the elderly. This Senate committee has apparently made requests to several insurers about its agent training materials and agent screening procedures. Moreover, it was reported that this committee contacted several sponsors of credentials and/or insurance marketing organizations concerning the certifications and training materials provided to insurance agents selling financial services or products to seniors. It appears that this new federal inquiry is following the recent action by certain state securities regulators over the use of misleading professional designations and the sale of equity-indexed annuities by insurance licensed only agents.
Labels: Equity-Indexed Annuities
posted by bhill at 10:07 PM
Nebraska Securities Bureau Requiring Approval of Professional Designations
In today's edition of the Omaha World-Herald, Jack Herstein, deputy director of the Securities Bureau of the Nebraska Department of Banking and Finance, noted that the Securities Bureau has approved eight (8) professional designations for use by registered investment advisers in Nebraska.
Those professional designations already approved for use by registered investment advisers in Nebraska include the following: Certified Financial Planner (CFP); Chartered Financial Consultant (ChFC); Personal Financial Specialist (PFS); Chartered Financial Analyst (CFA); Chartered Investment Counselor (CIC); Chartered Life Underwriter (CLU); Life Underwriter Training Council Fellow (LUTCF); and Financial Services Specialist (FSS).
In the Omaha World-Herald article, Herstein noted that the Securities Bureau is currently reviewing a dozen other professional designations that have requested approval, but there are over fifty (50) other professional designations that have not yet applied for approval with Nebraska. Herstein also explained that once this professional designation review process is completed, a person (presumably an investment adviser representative or registered representative of a broker-dealer in Nebraska) could be fined or suspended for using professional designations that haven't been approved by the Nebraska Securities Bureau.
In light of these comments and the Nebraska Securities Bureau's recent regulatory investigations of the marketing of equity-indexed annuities to seniors and scrutiny of the professional designations used by insurance-only agents, investment adviser representatives registered in Nebraska need to be careful and utilize only approved professional designations.
For investment adviser representatives registered outside of Nebraska, it should be recognized that other state securities regulators are taking note of the Nebraska Securities Bureau's efforts to regulate the use of professional designations. In particular, the Massachusetts Securities Division is utilizing an approach similar to Nebraska.
Even if an investment adviser representative is registered in a state that hasn't adopted a rule or otherwise taken a public position regarding the use of professional designations, RIA Compliance Consultants recommends that such investment adviser representatives exercise extreme caution and only utilize a professional designation that has substantial educational requirements, experience standards, a code of ethics, and a continuing education requirement. It should be understood that a state securities regulator may attempt to argue that the use of certain professional designations, which are lacking of the above requirements, are misleading under the general anti-fraud provisions of the state securities act despite the lack of any specific rule regarding designations.
Those professional designations already approved for use by registered investment advisers in Nebraska include the following: Certified Financial Planner (CFP); Chartered Financial Consultant (ChFC); Personal Financial Specialist (PFS); Chartered Financial Analyst (CFA); Chartered Investment Counselor (CIC); Chartered Life Underwriter (CLU); Life Underwriter Training Council Fellow (LUTCF); and Financial Services Specialist (FSS).
In the Omaha World-Herald article, Herstein noted that the Securities Bureau is currently reviewing a dozen other professional designations that have requested approval, but there are over fifty (50) other professional designations that have not yet applied for approval with Nebraska. Herstein also explained that once this professional designation review process is completed, a person (presumably an investment adviser representative or registered representative of a broker-dealer in Nebraska) could be fined or suspended for using professional designations that haven't been approved by the Nebraska Securities Bureau.
In light of these comments and the Nebraska Securities Bureau's recent regulatory investigations of the marketing of equity-indexed annuities to seniors and scrutiny of the professional designations used by insurance-only agents, investment adviser representatives registered in Nebraska need to be careful and utilize only approved professional designations.
For investment adviser representatives registered outside of Nebraska, it should be recognized that other state securities regulators are taking note of the Nebraska Securities Bureau's efforts to regulate the use of professional designations. In particular, the Massachusetts Securities Division is utilizing an approach similar to Nebraska.
Even if an investment adviser representative is registered in a state that hasn't adopted a rule or otherwise taken a public position regarding the use of professional designations, RIA Compliance Consultants recommends that such investment adviser representatives exercise extreme caution and only utilize a professional designation that has substantial educational requirements, experience standards, a code of ethics, and a continuing education requirement. It should be understood that a state securities regulator may attempt to argue that the use of certain professional designations, which are lacking of the above requirements, are misleading under the general anti-fraud provisions of the state securities act despite the lack of any specific rule regarding designations.
Labels: Advertising, Equity-Indexed Annuities
posted by bhill at 10:24 AM
State Securities Regulators Are Scrutinizing Elderly Seminars Used to EIAs
It appears that certain state securities regulators are continuing their investigation of insurance only agents offering equity indexed annuities by focusing upon the use of seminars targeted toward the elderly and underlying training associated with such seminars.
As noted in a recent article in Investment News, the Massachusetts Securities Division is scrutinizing various marketing efforts by insurance marketing companies to train agents to disturb elderly clients about their current financial situation and separate the elderly client from his or her current financial advisor. For your reference, click here for a copy of the Investment News article referenced above.
Based on this article and our experience in working with insurance only agents subject to a regulatory investigation, it appears that certain state securities regulators are utilizing the internal training and marketing materials of insurance marketing companies to support enforcement actions against insurance only agents offering equity indexed annuities.
If your firm would like to retain RIA Compliance Consultants for guidance regarding its seminar materials or to prepare an investment advisor registration, please contact us at your convenience.
As noted in a recent article in Investment News, the Massachusetts Securities Division is scrutinizing various marketing efforts by insurance marketing companies to train agents to disturb elderly clients about their current financial situation and separate the elderly client from his or her current financial advisor. For your reference, click here for a copy of the Investment News article referenced above.
Based on this article and our experience in working with insurance only agents subject to a regulatory investigation, it appears that certain state securities regulators are utilizing the internal training and marketing materials of insurance marketing companies to support enforcement actions against insurance only agents offering equity indexed annuities.
If your firm would like to retain RIA Compliance Consultants for guidance regarding its seminar materials or to prepare an investment advisor registration, please contact us at your convenience.
Labels: Advertising, Equity-Indexed Annuities
posted by bhill at 10:07 AM
EIAs in Spotlight
For those of you following the debate over whether an equity-indexed annuity is a security or insurance product, there's an article on the subject in the January issue of Registered Representative magazine.
As we've discussed before, many state securities regulators are classifying an insurance licensed only agent selling equity-indexed annuities ("EIAs") as an unregistered investment advisor if the insurance licensed only agent discusses the general stock market with clients and then receives indirect compensation such as an EIA commissions.
Please contact us if you're insurance only agent interested in registering as an investment advisor.
As we've discussed before, many state securities regulators are classifying an insurance licensed only agent selling equity-indexed annuities ("EIAs") as an unregistered investment advisor if the insurance licensed only agent discusses the general stock market with clients and then receives indirect compensation such as an EIA commissions.
Please contact us if you're insurance only agent interested in registering as an investment advisor.
Labels: Equity-Indexed Annuities
posted by bhill at 11:53 AM
