FINRA oversite uses fines and penalties to regulate the security industry
Regulations can be costly for business, and we as citizens
- How would you feel if France suddenly announced they would be monitoring the US Military?
- How would you feel if your neighbors told you they would supervise your children?
- How would you feel if your bank announced it would have to approve your spending?
I wouldn’t put up with that for a second, would you?
Well, it has happened to our insurance industry segment: the Financial Regulatory Authority Inc. (FINRA) is paying close attention to how and when investors are exchanging variable annuities for other products, such as indexed annuities. FINRA is the security industry watchdog whose goal is to safeguard investors and protect them against wrongdoing.
Each State Department of Insurance oversees our insurance industry, and it has always been that way. But wait, FINRA only regulates and marshals security brokers and security companies. How would FINRA feel if the California Department of Insurance announced they would investigate mutual fund sales?
Absurd and overreaching. FINRA does exactly what they were designed to do, assist the securities industry professionals through education and overseeing security activities. There has long been a separation between FINRA and each State Department of Insurance but now their fingers are slipping around our industry, and I wonder why.
Could it be that people are fed up with how the security industry is managed and overseen? Could it be because the fees associated with security sales are obscene? Could it be many folks want safety and security and comfort so their funds won’t disappear with broker fees and expenses?
The simple fact that FINRA even has an interest in our insurance products is alarming. Could it be the administration wants to end as many states’ rights as possible and make sure the only ones really in control are the Feds?
I am not sure of the answer, but my guess is probably not far off. I think that Fixed Indexed Annuities are the future for the Baby Boomers and not having control over that product means the loss in revenue for FINRA, and once again, they will try their hardest to wiggle into our world.
Three years ago, we had to fight them off when they attempted to introduce 151a, which would have granted control over Fixed Indexed Annuities by having them designated security. How can an insurance product with no risk, no downside, and full of safety and security provisions even be considered a security? FINRA was overreaching then, just as it is now.
Fortunately, clear heads prevailed, and it was defeated. But still, they come, and still, they want to get their grimy hands on our industry.
Ask yourself why. I think the answer is, as I have stated: money. They see control over what will be the biggest sector of the annuity industry will be a huge financial landfall, and they want it.
There has been almost no situation where our products have been abusive or where security licensed brokers have used them incorrectly. What is at stake is money, money being shifted from the industry-leading product, variable annuities (securities) to insurance issued produced. The Baby Boomers are coming to our products, and the security industry cannot stand to be left out, so here comes the white horse, a white horse known as FINRA.
One article reported that FINRA is concerned about product design and making sure disclosure is fully represented. I assume they want a 600-page prospectus so the Baby Boomers can read until they fall asleep. FINRA is entirely off base.
Our industry can take care of itself without the help of an over-budgeted lobbyist-driven conglomerate hiding behind the word “disclosure.”
