Breaking news: SEC approves Ruling 151A

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Borker Boy's picture
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snaggletooth's picture
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Can you post a link?  I'm searching for it and can't find anything.

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gvf
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snaggletooth's picture
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Well that's fine, as long as the product doesn't change, actually better for those that have the license.  So now they will have to be run through a BD and you'll get a haircut on the commission.  Less competition, not that there was any really to begin with.  Probably no more Dateline shows.
 
It's a great product in the right situation. 
 
By the way, here's a site about this rule, although not really unbiased:  http://sec151a.com/

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The Securities and Exchange Commission (SEC) has scheduled a hearing for Dec. 17 which may regard proposed Rule 151A. We urge you to call your congressman today!Hahahahahaha. 

Anonymous's picture
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I'm all for regulating these things.  And FYI  - Bobby has his S7 so he will not be affected.

Borker Boy's picture
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Sure, he can still sell them, but now he'll wonder whether big brother is listening in on his seminars at the nursing home.
 
 

Dick Butkus's picture
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Borker Boy wrote:Sure, he can still sell them, but now he'll wonder whether big brother is listening in on his seminars at the nursing home.
 
 
 
Wow.  You really think that low of him?  What, may I ask, do you do that puts you on such a high pedestal?

Borker Boy's picture
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I sell American Funds. Need I say more?

Dick Butkus's picture
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Borker Boy wrote:
I sell American Funds. Need I say more?
 
Yes.  Absolutely say more.  How much do you charge for these index funds, I mean, American Funds?

YHWY's picture
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Dick Butkus, Why didn't you choose a tougher name, like, "Tat Sacklick"?Sorry, standing joke. Couldn't resist.

Borker Boy's picture
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Dick Butkus wrote:Borker Boy wrote:
I sell American Funds. Need I say more?
 
Yes.  Absolutely say more.  How much do you charge for these index funds, I mean, American Funds?
 
That depends.
 
What's the maximum amount you'd like to invest today, Mr. Butkus?
 
And the maximum?

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Borker Boy wrote:Dick Butkus wrote:Borker Boy wrote:
I sell American Funds. Need I say more?
 
Yes.  Absolutely say more.  How much do you charge for these index funds, I mean, American Funds?
 
That depends.
 
What's the maximum amount you'd like to invest today, Mr. Butkus?
 
And the maximum?
 
Well I might have $40,000.  I can bring you my brother, he has $150,000.  My friend has about $600,000.  And I know Mike Ditka is sitting on $1.5MM.
 
What's the total cost in each of our situations and how is it paid?

Borker Boy's picture
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That's a great question. I'm glad you asked. 
 
Actually, I hate Mike Ditka, so he can keep his money.
 
Let's talk about you, Butkus. I know you can scrounge up a piddly $1 million, and at that level, there will be NO sales charge--coming or going.  NONE, ZERO, ZILCH.
 
No 15%, fifteen year surrender penalties, no caps, no participation rates, no crazy crediting methods to have to contend with. Just 100% transparency.
 
So, what's it gonna be, butt kiss?

Dick Butkus's picture
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Borker Boy wrote:That's a great question. I'm glad you asked. 
 
Actually, I hate Mike Ditka, so he can keep his money.
 
Let's talk about you, Butkus. I know you can scrounge up a piddly $1 million, and at that level, there will be NO sales charge--coming or going.  NONE, ZERO, ZILCH.
 
No 15%, fifteen year surrender penalties, no caps, no participation rates, no crazy crediting methods to have to contend with. Just 100% transparency.
 
So, what's it gonna be, butt kiss?
 
Hmmm.  "NONE, ZERO, ZILCH".  That does sound intriguing.  BUT, I've heard of things like expense ratios and trading costs, so is there something you're hiding from me?  Trust is difficult to develop when one party lies or omits material facts.
 
Here's the thing Borker Girl.  I don't need you to make me money.  I need you to not lose me any money.  You see, young pup, I've hit enough people on the football field over the years and I've made it.  Tell me, how much risk am I really taking with your suggestions?

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So, let me get this straight.  Those who are anti-EIA are for SEC oversight of these products?  These products who, when held for the length of the surrender charge, will not lose a client money?  The same SEC who's "oversight" somehow missed Bernie Madoff's $50 BILLION Ponzi scheme?  Where hundreds of individuals, institutions, charitable organizations have now seen their accounts lost (presumably forever)?  That SEC?
 
I don't sell EIAs as my B/D will not allow it, but it seems like those who voted yes on 151a are truly non-thinkers.  The same assesment can be made of those who have reacted with joy over this.  Either you truly do not understand how these products can work in conjunction with one's other assets, or you refuse to learn.  Either way, I can make the case that you are doing your clients a disservice.  And yes, I realize there are unethical reps who sell these products.  Just like there are unethical agents selling every financial product under the sun.  So spare us the horror stories of EIAs.  We've heard them. 
 
I know the previous statements are going to start a shit-storm, so have at it.  I'm ready to defend my position.  Be prepared to do the same for your cases.

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Borker Boy wrote:That's a great question. I'm glad you asked. 
 
Actually, I hate Mike Ditka, so he can keep his money.
 
Let's talk about you, Butkus. I know you can scrounge up a piddly $1 million, and at that level, there will be NO sales charge--coming or going.  NONE, ZERO, ZILCH.
 
No 15%, fifteen year surrender penalties, no caps, no participation rates, no crazy crediting methods to have to contend with. Just 100% transparency.
 
1% CDSC in the first year.  Forget about that one?  100% transparency?  Really?  Since when can you find out when a manager buys and sells something?  How much a commission do they pay when they buy and sell? 
 
So, what's it gonna be, butt kiss?
 
You truly have no idea how mutual funds work.  I can tell. 

YHWY's picture
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deekay, Have you ever inquired with your B/D as to why they do not allow the sale of EIA's? If so, what was their response?

Dick Butkus's picture
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deekay wrote:So, let me get this straight.  Those who are anti-EIA are for SEC oversight of these products?  These products who, when held for the length of the surrender charge, will not lose a client money?  The same SEC who's "oversight" somehow missed Bernie Madoff's $50 BILLION Ponzi scheme?  Where hundreds of individuals, institutions, charitable organizations have now scene their accounts lost (presumably forever)?  That SEC?
 
I don't sell EIAs as my B/D will not allow it, but it seems like those who voted yes on 151a are truly non-thinkers.  The same assesment can be made of those who have reacted with joy over this.  Either you truly do not understand how these products can work in conjunction with one's other assets, or you refuse to learn.  Either way, I can make the case that you are doing your clients a disservice.  And yes, I realize there are unethical reps who sell these products.  Just like there are unethical agents selling every financial product under the sun.  So spare us the horror stories of EIAs.  We've heard them. 
 
I know the previous statements are going to start a shit-storm, so have at it.  I'm ready to defend my position.  Be prepared to do the same for your cases.
 
This is the kind of advisor I'm looking for.  You need to switch B/D's so you can help me, not this mutual fund jokester that will help me lose what I've got. 

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YHWY wrote:deekay, Have you ever inquired with your B/D as to why they do not allow the sale of EIA's? If so, what was their response?
 
I have.  Given the regulatory uncertainty, they decided to make things easy for themselves and restrict their reps' use of them.  Now that there has been a ruling, I am not sure how they will respond.

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I only ask because I can't imagine any BD forbidding the sale of any type of investment that is both a great value to the client and very profitable to the BD, whether it is regulated by the SEC or not.

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You do realize EIAs are not an investment, right?
 
Anyway, I cannot comment on what, if any, alterior motives my B/D had in restricting use of EIAs withh clients.  The official line is what I'm going with until someone tells me otherwise.  For the record, I see why they have taken that stance.  One less compliance issue to worry about means more time they can spend on more productive pursuits.

YHWY's picture
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Really, are fixed annuities?

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Never mind, I'll re-phrase, "I only ask because I can't imagine any BD forbidding the sale of any
type of insurance product that is both a great value to the client and very
profitable to the BD, whether it is regulated by the SEC or not."

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deekay wrote:
 Anyway, I cannot comment on what, if any, alterior motives my B/D had in restricting use of EIAs withh clients.  The official line is what I'm going with until someone tells me otherwise.  For the record, I see why they have taken that stance.  One less compliance issue to worry about means more time they can spend on more productive pursuits. I respect your humility.  Perhaps others here may have some input. Are there any folks from, oh, I don't know, Merrill, UBS, AGE/WB, MS, Smith Barney or others who can answer my question, which is, "Why would any BD forbid the sale of any investment (insurance product/contract) that is both a great value to the client and very profitable to the BD?"

deekay's picture
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Please see my edited post above.

YHWY's picture
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Done. See above.

deekay's picture
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YHWY wrote: deekay wrote:
 Anyway, I cannot comment on what, if any, alterior motives my B/D had in restricting use of EIAs withh clients.  The official line is what I'm going with until someone tells me otherwise.  For the record, I see why they have taken that stance.  One less compliance issue to worry about means more time they can spend on more productive pursuits. I respect your humility.  Perhaps others here may have some input. Are there any folks from, oh, I don't know, Merrill, UBS, AGE/WB, MS, Smith Barney or others who can answer my question, which is, "Why would any BD forbid the sale of any investment (insurance product/contract) that is both a great value to the client and very profitable to the BD?"
 
I would guess that they don't sell them because of the regulatory uncertainty combined with their focus on AUM vs. insurance products. 
 
There's a reason most wirehouse reps don't sell any insurance products.  There's no margin for the rep or the firm when commissions must be put through the grid.

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 There's a reason most wirehouse reps don't sell any insurance products.  There's no margin for the rep or the firm when commissions must be put through the grid. That is 100% contrary to my experience, if you consider AGE to have ever been a wirehouse. Any other wirehouse folks have any input?

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Borker Boy wrote:Oh yeah, baby!
Time to hit the books, Hank/Bobby.
 
 
http://www.seniormarketadvisor.com/r/smaMag/d/contentFocus/?adcID=32aa5c9781bc7d33721c877a08ea9887What books?

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Borker Boy wrote:Sure, he can still sell them, but now he'll wonder whether big brother is listening in on his seminars at the nursing home.
 
 You are a Jones broker. Enough said.

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Hank Moody wrote:
Borker Boy wrote:Oh yeah, baby!
Time to hit the books, Hank/Bobby.
 
 
http://www.seniormarketadvisor.com/r/smaMag/d/contentFocus/?adcID=32aa5c9781bc7d33721c877a08ea9887What books?  GREAT forecheck!!!!

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Borker Boy wrote:That's a great question. I'm glad you asked. 
 
Actually, I hate Mike Ditka, so he can keep his money.
 
Let's talk about you, Butkus. I know you can scrounge up a piddly $1 million, and at that level, there will be NO sales charge--coming or going.  NONE, ZERO, ZILCH.
 
No 15%, fifteen year surrender penalties, no caps, no participation rates, no crazy crediting methods to have to contend with. Just 100% transparency.
 
So, what's it gonna be, butt kiss?Which of the companies held in your american funds have going concern qualifications?

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YHWY wrote:
 There's a reason most wirehouse reps don't sell any insurance products.  There's no margin for the rep or the firm when commissions must be put through the grid. That is 100% contrary to my experience, if you consider AGE to have ever been a wirehouse. Any other wirehouse folks have any input?
 
My experience is that I sell more death benefit in a month than most wirehouse reps sell in their entire careers.  Same thing goes for disability income insurance.  Bottom line is, when I get a net 85% payout on insurance products vs. a wirehouse rep who gets a net 20% payout, it's not hard to see why a wirehouse rep will focus much more on marketable securities and charging AUM fees.

Hank Moody's picture
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It doesn't go into effect until January of 2011. That leaves plenty of time to reverse the ruling. 

YHWY's picture
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Then why doesn't your firm allow EIA's? They are obviously comfortable with sophisticated insurance products, some of which are and have been overseen by the SEC?

Hank Moody's picture
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deekay wrote:YHWY wrote:
 There's a reason most wirehouse reps don't sell any insurance products.  There's no margin for the rep or the firm when commissions must be put through the grid. That is 100% contrary to my experience, if you consider AGE to have ever been a wirehouse. Any other wirehouse folks have any input?
 
My experience is that I sell more death benefit in a month than most wirehouse reps sell in their entire careers.  Same thing goes for disability income insurance.  Bottom line is, when I get a net 85% payout on insurance products vs. a wirehouse rep who gets a net 20% payout, it's not hard to see why a wirehouse rep will focus much more on marketable securities and charging AUM fees.I love asking people why the suppose their brokers never mentioned insurance products to them.

Hank Moody's picture
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YHWY wrote:Then why doesn't your firm allow EIA's? They are obviously comfortable with sophisticated insurance products, some of which are and have been overseen by the SEC?
B/D's don't allow EIA's because they can't get a piece of the action. I guarantee you that the b/d's were much of the driving force behind turning them into securities.

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Hank,  As a business owner in this very field, I'd love your input as to why would any BD forbid the sale of any product that is both a great value to the client and very profitable to the firm? Especially one (EIA's) that you've provided so much valid, positive information about?

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Sorry, jumped the gun. That answer doesn't hold water. EIA's can be mandated to Be run through the firm at any BD just like any other annuity and, like any annuity, they can set the payout wherever they choose (keeping whatever "cut" they choose).

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Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted? 

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YHWY wrote:Then why doesn't your firm allow EIA's? They are obviously comfortable with sophisticated insurance products, some of which are and have been overseen by the SEC?
 
My B/D restricted the use of EIAs in the last two years or so.  Their position is that there was/is too much regulatory uncertainty regarding EIAs.  Since I'm not in a position to change corporate policy, it's safe to assume I don't have an inside track to their alterior motives.  For all I know they say "regulatory uncertainty" when they mean "these products suck and are 100% not appropriate for any client."  I can't be sure either way.

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Sam Houston wrote:Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted?  They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.

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Sam Houston wrote:Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted? 
 
Here's what I could find:  http://www.sec.gov/rules/proposed/2008/33-8933.pdf
 
See bottom of page 45.  As best I can tell, the rule would be in effect for new contracts as of the effective date, which could be anywhere from 60 days to 2 years. 
 
 

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Hank Moody wrote: Sam Houston wrote:Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted?  They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.
 
Thank god for regulation!!!

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Hank Moody wrote: Sam Houston wrote:Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted?  They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.
 
But hey, they were only sold in the first place because of those FAT commissions
 
The short-sightedness and hypocracy of the SEC and their cronies is truly comical.  Again, nobody has been able to answer this fundamental question: the SEC missed a $50 billion Ponzi scheme but feels qualified and justified in regulating a product that IS NOT AN INVESTMENT.  How does this make sense?  Could it be that Bernie Madoff's relationship with the NASD kept the wolves at bay while he destroyed the financial lives of literally millions of people?  Could it be investment firms feel threatened by the emergence of EIAs as a viable alternative to mutual funds, securities, and wrap accounts?

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Sam Houston wrote:Hank Moody wrote: Sam Houston wrote:Back on topic, does anyone know what happens to existing EIA's when (or if) this rule is enacted?  They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.
 
Thank god for regulation!!!
 
Houston...we have a gullibility problem....

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It was a serious question, and I did catch the sarcasm in the response.  Just wondering if anyone knows. 

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Actually, Hank's senario isn't too far-fetched.  My guess is the SEC will start messing with minimum/maximum caps, free withdrawal amounts, and maximum CDSCs.  All those EIAs that fall outside those requirements will need to be replaced.

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thanks

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deekay wrote:Actually, Hank's senario isn't too far-fetched.  My guess is the SEC will start messing with minimum/maximum caps, free withdrawal amounts, and maximum CDSCs.  All those EIAs that fall outside those requirements will need to be replaced.
 
From the summary of the report: 
"The proposed rule would apply on a prospective basis to contracts issued on or after the effective date of the rule."

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