Is There Finally Some Hope for the NASD Regarding Indexed Annuities?

New NASD Chairman, Mary Schapiro appears to sound a little more reasonable about her view of the role of the NASD regarding insurance products. When a planned notice to members is released soon, regarding the position of the NASD on life settlement transactions, we will know more definitively how balanced her positions really are. But in her recent talk at a conference in Hollywood, Fla., organized by the compliance and legal division of the Securities Industry Association, Washington, Ms. Schapiro was quoted saying that, "equity indexed annuities may not be securities" and further stated that “plain vanilla annuities are not securities.” While this may not be a full admission that EIAs are purely insurance products, it is a few steps back from the confusing double talk of her predecessor. Her other comments, about the need for brokers to carefully weigh the alternatives before recommending the sale of an existing life insurance policy through a life settlement company, at first may seem somewhat an intrusive interference by the NASD into a business which is not under their jurisdiction. But if this is as far as her comments go, I have hopes that maybe some of the recent attacks by the NASD on fixed and indexed annuities may be slowing to a manageable discussion. I strongly agree with her explanation, that while variable, fixed, and indexed annuities are often purchased to provide a similar purpose, the inherent differences in each of each of these products do not equally fulfill the needs of every client. Nevertheless, this does not provide the NASD an invitation to participate in the decisions regarding the regulation or the sale of non-registered insurance products such as fixed and indexed annuities. The truth has to be accepted that registered representatives, who are also insurance licensed, will have to answer to two different masters, depending upon which products they are presenting. The NASD certainly does not accept that a licensed insurance agent, who is registered to sell mutual funds, must also answer to their state insurance department regarding their activities in the sale of these registered products. That portion of their business clearly does not fall under the domain of insurance regulators, but the NASD. Likewise, fixed and indexed annuity sales by a registered broker do not fall under the jurisdiction of the NASD, but are only subject to the authority of each state insurance department.