The WSJ’s article on the SEC’s Annuity Smackdown
Check out what the WSJ had to say about The SEC’s Annuity Smackdown. The key points from the July 21st article on page 17……
This particular illegal SEC land grab began in 2008, when then chief Christopher Cox announced his agency would regulate fixed indexed annuities. These niche products, like traditional annuities, guarantee buyers a return of their principal and a certain level of interest. The bonus is that they also earn interest on the upside performance of stock or bond indexes. If the S&P 500 goes up, the annuity holders profit. If it falls, investors still get their principal and interest.
Fixed indexed annuities have long been treated as insurance products, subject to strict state insurance regulation. Yet Mr. Cox and his merry band argued that these annuity products ought to be considered “securities” (and thus under SEC purview) because they involve market “risk.” Never mind that the only risk to investors is that they might make more money than expected.
The SEC’s rule, which passed in December 2008 on a 4-1 vote, required annuities to be registered with the SEC and sold by registered broker-dealers, rather than insurance agents. This was a slap at state insurance commissioners, particularly because the SEC couldn’t provide a legitimate reason that states should be robbed of their regulatory authority. A coalition of insurance commissioners sued, as did the insurance industry. Current SEC chief Mary Schapiro could have pulled the plug at that point, but true to her history she plowed ahead in court. (See our editorial, “The SEC’s Annuity Grab,” March 7, 2009.)
Lo, the D.C. Circuit Court of Appeals last week threw out the rule in its entirety, noting it was arbitrary and capricious given existing state oversight. And in case the SEC didn’t take that hint, Congress included a provision in the new financial regulation bill that more or less bars the agency from regulating these products. Even Democrats decided this SEC power grab would serve no purpose other than to make fixed indexed annuities more expensive, and cost their home state insurance industries jobs.
Perhaps now, the SEC can focus on the securities industry, and figure out a way to bring consumer awareness and transparency to an industry that ignores the need to protect principal when it comes to retirement and income planning. I know – that is more than we can hope for – in fact, it’s just not possible. It’s the nature of the beast.
I’m proud to focus my practice on the protection of principal AND income solutions. Providing safety and opportunity, on the same dollar at the same time. Wow! I’m so thankful that these powerful and innovative SAFE MONEY solutions continue to be offered and regulated as insurance products. Why? Because insurance companies manage risks – they don’t take risks.
These insurance products allow the Singer Financial Group to remain true to our mission; We show you how to never lose money, and never run out of money in retirement!
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