No Free Lunches
The SEC is investigating forty investments firms located in Florida, California, Arizona, Texas, North Carolina, and Alabama over so-called "free lunch" investment seminars that target senior citizens. Seniors who attend these seminars get a free meal and a hard sell for investments that the SEC believes may range from inappropriate to fraudulent.
The seminars are often promoted as being hosted by other seniors who may be familiar to local people and seem trustworthy. Pitchmen at the seminars promote a wide range of products, suitable and otherwise.
Scams frequently perpetrated against elderly investors include affinity frauds, where the perpetrators target people with shared interests, such as a church memberships, and variable annuity sales that put seniors into unsuitable or costly investment products. "Viatical" and "life settlement" scams are also common. In these scams, seniors sell the death benefit of life insurance policies at a discount for cash. A broker then sells shares to investors who are promised a proportionate share of the death benefit when the insured dies. Officials believe that these high-risk schemes often cheat investors.
According to the North American Securities Administrators Association, nearly half of all investor complaints received by state securities regulators involve senior citizens. That figure is likely to rise as baby boomers age.
The Insurance Industry has the control over Insurance Products non risk products as the Index Annuity is a true guaranteed from loss product...
The NASD has control over all the Securities products risk investments the Variable Annuity is not a guaranteed from loss product....
Why is there a problem? It seems to me the border jumper here is the NASD in it's attempt to control what was never mandated to them to begin with and that is product, such as the Safe Index Annuity which is not considered a risk product or a Security Product but a Insurance Industry Product.
So now what's up with the NASD? it's confused position for the safety & risk control with the retiree/senior savings already exist yet their very position of trying to control this safe type product that really has never been mandated to their control or authority is not a position I would like to work under?
If they don't want their membership to sell the Index Annuity why not just do so? Most would prefer they stay out of the non risk Insurance market anyway if for no other reason then their current tract record and how they made such a mess of the Variable Annuity market with it's still ongoing problems that they have not been able to resolve.
How are they going to present or control the Index Annuity with all of it's moving parts which not one of has to do with risk but the clients potential for gain/growth based on what suitability controls? Not all Index Annuity carriers offer the same working parts in the same manner etc. decisions decisions.
You can send us your complaint using our online complaint form at www.sec.gov/complaint.shtml.
You can also reach us by regular mail at: Securities and Exchange Commission Office of Investor Education and Assistance
100 F Street, N.E. Washington, D.C. 20549-0213
For more information about investing wisely and avoiding fraud, please check out the Investor Information section of at www.sec.gov/investor.shtml.
A New Problem has unfolded for Seniors and the Retired Please Be Aware and Careful.. who you buy your Index Annuity from and why......
Please review the following news release from the NASD below... What the NASD does to control it's own membership is it's own business, but I want the public to see what they are doing to control the Index Annuity as a safe product and it's effects for seniors and the retired. Once again they look at the Index Annuity as very serious competition and are very fearful of this product and it's position in the market place and have issued the following guide line and rules for it's membership. Index Annuity design and safety standards that are built into protect principal loss are now a real issue.
The NASD does not control all of the Annuity Industry nor the products that are non-registered with them etc. but they do control it's membership that fall under both the NASD rules as well the Insurance Industry regulation and rules by choice. Risk vs Non-Risk and who will approve this suitability issue for any client based on what industry guidelines and will it include risk/loss againt non risk and or non loss or guaranteed vs non guaranteed.
Are there more problems in the wings? Let's not forget "Suitability" Issues have long been the cause of the problems with the Variable Annuity product and industry and not the Index Annuity product Industry. So who is going to be reviewing these issues on the clients behalf ? Based on whose suitability criteria? Is it really going to be risk against non risk? Safety of principal vs product that by design that does not have any?The Suitability problems did not start to occur for the safe Index Annuity Product up until the NASD made it so not for any clients best interest but to try and take control of it as a new product once again because of the problems they have with the Variable Type Annuity and it's all so many spin off issues.
Since the NASD still has not taken a formal position with the senior market and any effect the Variable Annuities have played with their problems as a public position as the SEC has done, it should be very interesting as to how they think they can resolve the many issues of suitability that occur between the Variable Annuity and the Index Annuity client base and their members.
The question remains by whose authority does the NASD plan to oversee the non registered Index Annuity a safe product and how they are supplied and by whom to the Senior Market? A market that's suppose to be overseen by the Insurance Industry and many great organizations already in place to do just that.
Suitability complaints & fines have been many with the Variable Annuity Industry not the Index Annuity Industry, so once again we ask the NASD if you can not keep your own backyard clean... why are you concerned about jumping the fence into someone else's back yard? Well?
NASD News Release
FOR RELEASE:
CONTACTS:
Monday, August 8, 2005 Nancy Condon (202) 728-8379Herb Perone (202) 728-8464
NASD Issues Guidance Regarding Equity Indexed Annuity Sales
Concerns About Marketing, Supervision and Investor Protection Cited
Washington, D.C. — Expressing concerns about marketing, supervision, disclosure and investor protection issues, NASD today issued formal guidance to registered firms selling equity indexed annuities (EIAs).
EIAs are complex financial instruments in which the issuer,usually an insurance company, guarantees a stated interest rate and some protection from loss of principal, and provides an opportunity to earn additional interest based on the performance of a securities market index. Some EIAs are registered with the Securities and Exchange Commission (SEC) as securities. Many are not, based on a determination that they are insurance products that qualify for exemption under the Securities Act of 1933.
The question of whether a particular EIA is an insurance product or security is complicated, depends upon the particular facts and circumstances concerning the instrument offered or sold, and is determined on a case-by-case basis.
Notice to Members 05-50 does not take a position on whether a particular EIA is a security. Nevertheless, this uncertainty over whether a particular unregistered EIA may be a security complicates a broker-dealer's supervisory responsibilities. If an EIA is an insurance product, then a firm would have to treat sales of the EIA by its brokers as an outside business activity. If the EIA is a security, the firm would have to supervise the sale as a private security transaction. Because of this uncertainty, some firms require their brokers to obtain specific approval to sell unregistered EIAs. Still other firms maintain a list of approved EIAs and prohibit the sale of all others.
NASD's Notice says that firms should:
Consider maintaining a list of acceptable unregistered EIAs and prohibiting their brokers from selling any other unregistered EIA without the firm's written confirmation that the sale is acceptable.
Consider whether additional supervisory procedures would help protect the firm's customers. For example, a firm could require that all sales of unregistered EIAs are processed through the firm, meaning the firm must supervise the marketing material, suitability analysis and other sales practices in the same way it supervises the sale of securities through the firm.
Provide brokers selling any unregistered EIA through the firm with the proper training to ensure they understand the EIA's features and the extent to which the EIA meets the needs of a particular customer.
The Notice also reminds firms that under any circumstances, NASD suitability rules apply to any recommendation that a customer liquidate or surrender a registered security for the purpose of purchasing an unregistered EIA.
NOW MY SPIN ON THIS NONSENSE
My registered representative had placed me into a Index Annuity not of my choosing because He or She said the NASD organization they are with said ZYX Index Annuity was not acceptable for my needs based on what type of suitability thinking? Is a new kind of law suit now forthcoming? Will the Insurance Industry now be looking to fine the NASD?
The NASD firms will have decided what Index Annuity products/companies will be suitable to it's customers and what ones will not be.Wow suitability but limited choice now I can sleep at night. Anyone who buys the Index Annuity offered under the above guidelines will have purchase product on a limited choice selection basis of what's available in the marketplace and does this not restrict suitability choice for any client as well.
Running the risk also by the right product not being offered for the client needs and will be also running the risk of a limited choices compared to more choice.This is suitability?Remember it's the client in all the Index Annuity sales who makes all the final decisions based on all the information provided along with many choices for companies products growth selections. For example some companies have 100% participation through out the life of the Index Annuity for growth and some companies don't. Which will they choose for their clients and why?
It's true principal will be protected but also their opportunity for gain might equally become limited by not offering a complete choice selection this could reflect on the value and market place growth offered by Index Annuity as a product choice but with allowable gain per the clients final decision based on choice and not the agents decision being limited by one product/ company or growth selection etc. Limited choice means there is also limited suitability. A concern for Seniors yet to be completely addressed by the NASD.
You see what makes a Index Annuity Broker of such value to their client is not only all product and company selections but also all the market choices between the growth selections, the bonus selections that are available in the market place at large.Offering all those growth selections to their clients for their needs as choices with the client making all the final decisions. I think this is a point the NASD has still yet to understand and will it be passed on to it's membership.
Folks these problems are just beginning and will only get worse as the NASD trys to control what Index Annuities are suitable for what client through a very controlled and limited choice enforcement process. You see the limited mentality of this thinking that only being allowed to be licensed with one Broker for one Company or one Product is not at all acceptable thinking as a guideline or rule for a average Index Annuity agent but of course the NASD does not think in these terms for their clients or for their membership.
Here it goes again Folks the NASD will be trying to squeeze you all into the same old size shoe nine whether it fits or not. They have finally made their decision on what is suitable...for you.. are you happy now? Suitability as seen through the eyes of the NASD and soon to be made available by it's rep's.
I am curious as to why the NASD thinks all Index Annuity carriers offer the same product choices in all growth selections within different the different Index variations. These product choices/features can become important points for decision features for public to consider prior to a final decision. I wonder who will receive this NASD acceptance and who will not? and if they can't get access to certain companies or products or features will this then mean they are not good for clients or customers? Not really suitable?
And what does this mean? The Notice also reminds firms that under any circumstances, NASD suitability rules apply to any recommendation that a customer liquidate or surrender a "registered security" for the purpose of purchasing an unregistered EIA.
[ Here it is suitability risk against non risk yet suitability?? must be reviewed?? ] Yet it's OK to exchange one Variable Annuity for another if it has BETTER LIVING BENEFITS? NASD suitability standards being applied to non risk product over risk product? I would like to see a copy of this requirement as outlined with the safe Index Annuities as the products in question!!!
The commingle of two different product designs and worlds being brought together for the safety and good will of the NASD clients WOW. I will now remove you from this Variable Annuity and place you in this Index Annuity very sorry about your prior loss but the buck will now stop here!!! Yes that's right only we of the NASD are authorized to review these matters!Securities etc. and decide what's in your best interest and suitable Mr Senior/Retired.
Now that I actually see this type of thinking in print I think I am going to be sick. Their very poor success with the Variable Annuity means they will only screw up the moving parts choices of the Index Annuity "gain" a safe money product that they should not be involved with..Who has given the NASD this false sense of authority to get involved with safe product & then start making decisions or policy on moving parts that they don't understand or control yet have already taken steps to control for their clients based on a limited access control of only certain Index Annuity carriers?
If there has been no official position taken by the NASD for Seniors Retired Risk and/Suitability. Where is the common sense position to bleed risk away from those who are no longer working and can't afford future loss and that their retirement money must last as long as they do? This August 8the news release certainly has cleared up many of the concerns I have had about the NASD and their suitability decisions with the Index Annuity. There is none.
How About You.........I can't believe this low regard the NASD has placed on the Index Annuity.If you find yourself in the wrong Index Annuity who are you going to call ? The NASD? The SEC? The Insurance Department? What suitability guidelines will have got you into that product ?
What guidelines were in force and how do they interplay with a limited choice enforcement process as the NASD has now put into place. Only this product is suitable? while this other product that has this, that, or the other thing is not? But of course that one is not suitable for your needs because I don't have any access to it etc.
Do you believe clients questions that will then avoided by the writing agents because of the lack of other companies product knowledge or lack of other product offered by their firm via limited product accessibility this is NASD SUITABILITY decisions at their best?
Once again clients questions that will avoided by the writing agents because of a lack of the other companies product knowledge or their lack of the other products accessibility this is NASD firm suitability? Growth selections bonus selections, index selections caps vs participation % against those that don't have any to name a few...moving parts selection that maybe don't move in that product?
This type of thinking will lead to many new problems & I guess this is what the NASD is hoping for maybe to give the consumer or retired/senior limited choice and product spin. This type of limited selection process should not be allowed. As this NASD strategy unfolds with their plans to guide this limited product choice and selection policy for it's membership it's not only unfair for all of the above but takes away from the Index Annuity product by being offered through a limited field of selection choices.
Why does the NASD want their membership to write this product at all?
Then not make it available to the public based on the competitive nature of the companies in the market? Once again they throw this word suitability around to enhance their position but what really is their position?
Only the public can decide what choices offered are in their best interest?
Not the selling agent Index Annuities just don't work like that product trade off against time span goals and involvement does not match NASD suitability standards.I think there is a misuse of the word suitability by the NASD here just as there is a misuse of the word guaranteed by the NASD as reflected in their control and sales of the Variable Annuity to seniors and the retired...
They claim several carriers that do have risk type Index Annuities that are registered with the NASD as security products! Well why not just allow their membership to write those products instead of "jumping borders" into areas that they do not control/understand or do not want their membership to write anyway? Trying to control what they call outside business activity OK then just tell their membership not to write safe product why because they are suppose to be in the risk business. Then to apply suitability standards for this type of situtation shows the thinking of the NASD either allow it or don't but trying to regulate it is going to cause more problems for the public and add to the confused world they now live in with their Variable Annuity and their trying to make a risk product into something it is not....
The NASD has once again overstepped its bounds in it's attempt to enter the safe Insurance Product World as a non invited guest that should be made to leave....
Who are they trying to protect not the senior/retired but their ability to fine members in a confused position taken by adding even more confusion to a black and white issue because it keeps them in a game that they have no right to be a player in... Why does the NASD want to be in the NON RISK Annuity Business???
Could it be the Equity Index Products that are registered are not guaranteed from loss product and also charge fees etc.. It's obvious they don't want their NASD members to write the Safe Index Annuity why not just make it so..
We would prefer they stay out of the non-risk market and do a better job of trying to control the Variable Annuity with seniors/retired that should have never been placed in that product to begin with because of suitability issues.
Look at the following URL to see some of the confusion the NASD has helped to create.http://www.capitol.hawaii.gov/sessioncurrent/bills/scr55_.htm