Breaking news: SEC approves Ruling 151A
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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.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?
[quote=Sam Houston]Back on topic, does anyone know what happens to existing EIA’s when (or if) this rule is enacted? [/quote]
They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.
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.Back on topic, does anyone know what happens to existing EIA’s when (or if) this rule is enacted?
Thank god for regulation!!![quote=Sam Houston]Back on topic, does anyone know what happens to existing EIA’s when (or if) this rule is enacted? [/quote]
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?[quote=Sam Houston]Back on topic, does anyone know what happens to existing EIA’s when (or if) this rule is enacted? [/quote]
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!!![/quote] Houston...we have a gullibility problem....[quote=Hank Moody] [quote=Sam Houston]Back on topic, does anyone know what happens to existing EIA’s when (or if) this rule is enacted? [/quote]
They will have to be surrendered and the money put into the new regulated ones. Yes, there will be a new commission.
It was a serious question, and I did catch the sarcasm in the response. Just wondering if anyone knows.
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: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.
"The proposed rule would apply on a prospective basis to contracts issued on or after the effective date of the rule."
From the summary of the report:[quote=deekay]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.
"The proposed rule would apply on a prospective basis to contracts issued on or after the effective date of the rule."
[/quote] I understand, and thanks for the clarification. Since when is the goverment in the business of keeping promises? Just as easily they wrote this proposal they can change it after it passes. Don't kid yourself into thinking otherwise.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.”
I don't sell EIAs (I can't). The SEC is 100% wrong on this issue. A B/D will forbid the sale of a product because they aren't making any money on it, yet its sale must still be monitored as an outside business activity. Allowing the sale of these products has no benefit for the B/D if the sale doesn't have to go through the grid. I think that you mentioned in another post something about a B/D forcing the sale to go through the grid. For those who have an independent B/D (LPL and most of the insurance company reps), I don't think that it's even possible to force this. There is no employer-employee relationship. Insurance sales are simply an outside business activity. A B/D can say "no" to an outside business activity. They can't say "Ok, but only if you pay me." It's the equivalent of telling a non-employee registered/rep, "You can bartend on the weekends, but only if you put your tips through the grid." The difference is that bartending doesn't compete for investment dollars, so they don't say "no". An EIA competes and it doesn't get put through the grid, so they say "no". In short, it may be of value to the client, but it doesn't benefit the B/D, and, in fact, hurts them, so they ban them. An EIA is no more a security than a savings account. The fact that interest is credited based upon market factors is irrelevant. The money is not in the market. The interest on your savings account is also credited based upon market factors.[quote=deekay][quote=Borker Boy]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?[/quote] You truly have no idea how mutual funds work. I can tell. [/quote] You made my point. How many people do you think read what I wrote and actually researched it to see if what I said was true? I'd imagine that most who are unfamiliar with $1 million mutual fund breakpoints assumed what I said was accurate and thought nothing more of it. Imagine how easy it would be to deceive a group of 80 year-olds at a nursing home. Do you think they're actually going to follow up on an EIA salesman's statements or read the extremely confusing materials he gives them? Hence the hundreds of millions in lawsuits being filed against these guys. The bigger issue here is not whether EIAs are securities--they're not--but the tremendous need for a greater level of protection for investors. The state insurance boards are a complete joke, and if guys are going to stand up in front of a group of folks at the Golden Corral and give their opinion/advice about the stock market and how it will hurt them if they don't buy their product but change their lives if they do buy their product, they need a securities license. That's the issue. Maybe, just maybe, the idea that another group of people are now paying attention to how these guys are closing sales will help protect would be victims of predators.[quote=Borker Boy][quote=deekay][quote=Borker Boy]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?[/quote] You truly have no idea how mutual funds work. I can tell. [/quote] You made my point. How many people do you think read what I wrote and actually researched it to see if what I said was true? I'd imagine that most who are unfamiliar with $1 million mutual fund breakpoints assumed what I said was accurate and thought nothing more of it. Imagine how easy it would be to deceive a group of 80 year-olds at a nursing home. Do you think they're actually going to follow up on an EIA salesman's statements or read the extremely confusing materials he gives them? Hence the hundreds of millions in lawsuits being filed against these guys. The bigger issue here is not whether an EIA is a security--it's not--but the tremendous need for a greater level of protection for investors. The state insurance boards are a complete joke, and if guys are going to stand up in front of a group of folks at the Golden Corral and give their opinion/advice about the stock market and how it will hurt them if they don't buy their product but change their lives if they do buy their product, they need a securities license. That's the issue. Maybe, just maybe, the idea that another group of people are now paying attention to how these guys are closing sales will help protect would be victims of predators. [/quote]You are a Jones broker. Enough said.
[quote=Borker Boy][quote=deekay][quote=Borker Boy]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?[/quote] You truly have no idea how mutual funds work. I can tell. [/quote] You made my point. How many people do you think read what I wrote and actually researched it to see if what I said was true? I'd imagine that most who are unfamiliar with $1 million mutual fund breakpoints assumed what I said was accurate and thought nothing more of it. Imagine how easy it would be to deceive a group of 80 year-olds at a nursing home. Do you think they're actually going to follow up on an EIA salesman's statements or read the extremely confusing materials he gives them? Hence the hundreds of millions in lawsuits being filed against these guys. The bigger issue here is not whether an EIA is a security--it's not--but the tremendous need for a greater level of protection for investors. The state insurance boards are a complete joke, and if guys are going to stand up in front of a group of folks at the Golden Corral and give their opinion/advice about the stock market and how it will hurt them if they don't buy their product but change their lives if they do buy their product, they need a securities license. That's the issue. Maybe, just maybe, the idea that another group of people are now paying attention to how these guys are closing sales will help protect would be victims of predators. [/quote] You still have failed to remark on how you feel the SEC will better protect the public from EIAs in light of their spectacular failure in the Madoff Ponzi scheme. Please provide examples of how state insurance boards are a "complete joke". The fact you put so much faith in the SEC's ability to protect "victims of predators" shows you have no concept of what is really going on with 151a.You’re missing the big picture (investor protection), and I’m failing to see the big deal about folks having to go and get a securities license if they’re going to discuss the market with prospects–regardless of whether what they’re actually selling is a security. If you’re going to discuss the stock market, you must meet minimum requirements in the form of obtaining a piddly little license.
How could anyone argue that an additional level of protection for investors--regardless of the Commission's current challenges--is bad? I'd be embarrassed to attach my name to anything that stated that I didn't want additional scrutiny on my business practices. Bring it on. Greed is the driving force in this business--look at your buddy Madoff, for example--and the predatory behavior must stop.Who says you need to speak at all about the market when you sell EIAs? I imagine (if I were able to sell them) my conversation with a prospect would go something like this:
deekay: "Mr./Mrs. Prospect, given your conservative nature, I would suggest a deferred annuity for your IRA rollover. This way, you are guaranteed to not lose money as long as you hold it for the length of the surrender period. We can go one of two ways: a traditional fixed annuity, which pays a set interest rate. Or, we can go with a equity-indexed annuity. It's returns are partially tied to the return of the SP500. The traditional fixed annuity offers a higher minimum rate of return. The equity-indexed annuity offers the potential for a higher rate of return than the traditional fixed annuity. Which is more important to you: a higher minimum, or a higher maximum?" Prospect: "__________________________" deekay: "Great, sign here." The reason so many people are up in arms about not wanting to get a securities license to sell EIAs is because THEY ARE NOT SECURITIES. Spare me the "oh, well, you manage to talk abou the markets, so you must get securities licensed." spin. I proved you don't need to wax poetic about the fluctuations in the market. What I will lobby for is additional training of reps on how these products work. Clients, advisors, and the media would all benefit as a result. The SEC is not going to provide that training, and we know they've shit the bed countless times when trying to "regulate" so what good is it going to be for EIAs to be registered products?[quote=Borker Boy]You’re missing the big picture (investor protection), and I’m failing to see the big deal about folks having to go and get a securities license if they’re going to discuss the market with prospects–regardless of whether what they’re actually selling is a security. If you’re going to discuss the stock market, you must meet minimum requirements in the form of obtaining a piddly little license.
How could anyone argue that an additional level of protection for investors--regardless of the Commission's current challenges--is bad? I'd be embarrassed to attach my name to anything that stated that I didn't want additional scrutiny on my business practices. Bring it on. Greed is the driving force in this business--look at your buddy Madoff, for example--and the predatory behavior must stop. [/quote]Porker, take off the ruby slippers and return to earth.
Deekay - Not saying you’re wrong - But I have a feeling that although one doesn’t necessarily HAVE to “wax poetic” about market fluctuations to pitch an EIA - I guarantee you 99% of people selling them DO (especially right now).
Not mentioning the 40%ish loss in equities in 2008 while selling a product guaranteed to not LOSE any money is like a lawyer withholding the best piece of evidence when trying to prove his case. Yeah they COULD do it, but they’re probably not gonna…
That being said, I think that there’s some truth to what Borker said about State Insurance Boards being kind of a joke. Some are fine, some are terrible, there’s just no consistency. More than anything, I think the problem stems from insurance being state regulated while securities are federally regulated. If, hypothetically, there was a federal insurance regulating agency of some sort, EIA’s wouldn’t need to fall under the SEC, IMO.