Another very interesting article from Leslie Scism of the Wall Street Journal (article can be viewed by clicking here).

A continuation of the discussion thread on low fee annuities that can be viewed by clicking here.

The Journal article discusses variable annuities and the impact that relatively inexpensive ETFs are having on product development.

A Federal appeals court recently voided Rule 151A.

Rule 151A would have treated indexed annuities as securities and would therefore have shifted responsibility for regulation of indexed annuities from state departments of insurance to the Securities and Exchange Commission (SEC).

The proposed regulation that could expand fiduciary status to a broader set of financial advisors appears to be pending in Congress.

The Dodd version from the Senate Banking Committee would potentially extend fiduciary status to broker-dealers and registered representatives.  Broker-dealers are currently exempt from the Investment Advisers Act which defines fiduciary status.

Members of Congress and officials from the Departments of Treasury and Labor are working on options that would provide sources of guaranteed lifetime income to participants in 401k and other pension plans.

At a high level, it is clear that the Obama Administration wants to create structures and incentives for:

The Securities and Exchange Commission (SEC) has agreed to a two year "stay" on SEC Rule 151A.

SEC Rule 151A is a contentious rule that, from a regulation standpoint, would treat fixed indexed annuities as securities rather than insurance products. 

The securities regulation would be under FINRA oversight.

The stay basically postpones the rule's proposed January 12, 2011 effective date for a period of two years.

Source: Wall Street Journal

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Barron's reports that U.S. investors have filed more securities arbitration claims in 2009 than in all of 2008.  4,991 claims have been filed thus far in 2009.

Mandatory arbitration--which prevents a case from going straight to court--is essentially the sole recourse for investors who feel they have been harmed by a broker or advisor.

The arbitration system is run by Finra, which serves as the self-regulation arm of the securities industry.

The overall success rate of securities arbitration claims has crept-up to 45% through August of this year:

The National Association of Insurance Commissioners (NAIC) has proposed amendments to the regulatory framework that governs annuity sales.

The NAIC Suitability in Annuity Transactions Model Regulation is the existing framework.

The NAIC is proposing more stringent suitability guidelines for the sale of all types of annuities--including fixed annuities.

The amendments would place insurance agents who sell fixed annuities under the same suitability guidelines that apply to financial advisors who sell variable annuities.

Source: Investment News