SEC Proposed Rule 115A

Well depending on what Chicken Little ( you know that chicken with the sky falling deal ) story you read today the SEC is poised to end Indexed Annuity sales as we know them. Now there is no shortage of people that want you to believe this - the Broker Dealers, the firms trying to get you to set up or join their RIA, etc....so let's try to separate the fact from fiction.

First, this is far from a done deal. This is a proposed relegation, not a new law or rule. Some say it is just a matter of time before the SEC ( acting on FINRAs behalf ) gets the EIA under its control. Well, don't bet the car keys just yet.

There are major obstacles to the regulation being enacted. Here are just a few:

• Chairman Cox has less than 6 months left in office. Given the time frame and his need to get his resume together its arguable that he could get it done in that time frame.
• The next Chairman of the SEC may not have the burr in his saddle Cox does.
• 50 State Insurance Commissioners are not in favor of the rule and the loss of the control of this product has not set well at all. The product is an insurance product in their view!
• The collective insurance commissioners represent a large power base with their counterparts in Congress - keep in mind that these commissioners vote and are part of political parties - the SEC does not vote....
• The insurance industry is no shrinking Violet in the halls of Congress either and the pressure that will be brought will be huge.
• The insurance companies will in all likelihood challenge whatever the SEC does in court thereby tying up the whole mess for years.

In the end Purple Man believes that this is going no where. The bad acts of a few will ruin a great and useful product for consumers. We believe that the truth will prevail and that the SEC will fail again to classify the EIA as a security. That said, this is a reminder and wake up call to all advisors regarding sales practices and the need for honest and open sales presentations.

Table Bay Man will keep you posted on events as they unfold.