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NAIFA GovAlert
(Formerly Action Alert )

To: All NAIFA Members
From: Cliff F. Wilson, CLU, ChFC, LUTCF, CLF, NAIFA President
Date: December 12, 2008
Subject: Ask Your Members of Congress to Contact SEC and Oppose Proposed Rule 151A

Background: On June 25, 2008 the SEC issued proposed Rule 151A, which would classify most indexed annuities as securities. If the proposed rule is adopted, the SEC and FINRA would have authority over indexed annuity sales, and someone who wishes to market/sell indexed annuities will need a series 6 or 7 securities license and be required to have IA sales supervised by a broker/dealer. An insurance producer license, by itself, would no longer be sufficient. The SEC has scheduled this topic for discussion at the SEC Open Meeting scheduled for Wednesday, December 17.

NAIFA Position: NAIFA opposes the adoption of proposed Rule 151A. NAIFA acknowledges the concerns that have been raised regarding the suitability of certain indexed annuity sales and some of the methods used to market indexed annuity products. NAIFA strongly believes that people who engage in unscrupulous or misleading sales practices should be aggressively prosecuted and subject to appropriate and meaningful sanctions. However, concerns regarding suitability, disclosure and marketing methods are not the relevant criteria to consider in determining whether a financial product is or is not a security. NAIFA agrees with state insurance regulators that indexed annuities should be classified as insurance products, and that the state insurance regulatory structure is the appropriate means for addressing the concerns raised by the SEC. NAIFA is committed to working with the NAIC and state insurance departments towards the goal of having every state adopt and vigorously enforce the NAIC’s model regulations on annuity suitability and disclosure.

What You Can Do: The SEC may vote on proposed Rule 151A as soon as next Wednesday, December 17. Because Congress has ultimate control over securities regulation, your NAIFA leaders are asking you to contact your members of Congress as soon as possible and ask your Representative and Senators to contact the SEC and express opposition to proposed Rule 151A. You can do this by:

Sample Comments: It always has a greater impact if you use your own words when writing members of Congress! The following talking points can be used as the basis for your message to your Representative and Senators:

  1. I am asking you to contact the SEC and express your opposition to proposed Rule 151A.
  2. While I firmly believe that people who promote unsuitable sales and engage in misleading sales practices should be aggressively prosecuted and subject to meaningful sanctions, concerns about suitability and marketing methods are not the relevant factors for defining what is or is not a security.
  3. Indexed annuities should continue to be treated as insurance products and not as securities.
    Indexed annuities do not have the same type of investment risk as investment products such as mutual funds and individual stocks. With an indexed annuity, the risk of a downturn in the related index rests with the product issuer and not the consumer.
  4. It is important to preserve the principle that insurance products should be regulated by state insurance regulators. Towards this end, my professional association, the National Association of Insurance and Financial Advisors, is committed to working with state insurance departments towards the goal of having every state adopt and vigorously enforce the NAIC’s model regulations on annuity suitability and disclosure.

  5. Finally, I am concerned that the application of proposed Rule 151A would not be limited to indexed annuities and that other annuity and insurance products that fit the criteria set out in the rule would be covered under the rule.
  6. Thank you for your consideration of my request. I urge you to contact the SEC and express your opposition to proposed Rule 151A.

Technical Assistance? If you have technical questions about using NAIFA’s Legislative Action Center, please contact Vicky Dobbin at 703-770-8113 or communications@naifa.org. If you have questions about proposed Rule 151A, please contact Gary Sanders at 703-770-8192 or gsanders@naifa.org.

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