Finra chief lacks knowledge of fixed-annuity regulation
January 9, 2010 by Sheryl J. Moore
In the article “Finra chief: Proposed oversight commission could cause cracks in system,” which appeared on InvestmentNews.com on June 8, Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc. of New York and Washington, made some false statements about the fixed-annuity industry.
Specifically, he implied in the article that the annuities sector doesn’t keep the reins tight by requiring licensing exams, reviewing sales materials and requiring registered principals to approve variable annuity purchases.
In addition, Mr. Ketchum was quoted as saying, “In many states, you get detailed information on fees [on fixed annuities], but in some states, you may not.”
These statements are untrue.
State insurance divisions thoroughly review specimen annuity contracts, along with their sales materials, prior to approving them for sale in the state. Every insurance agent who sells fixed annuities must pass a licensing exam to do so.
In addition to these regulatory requirements, state insurance divisions regularly review the suitability of annuity sales and potential market conduct abuses, and they have the ability to impose sanctions, including — but not limited to — fines and revocation of insurance licenses.
In addition, all state insurance divisions’ laws require proper disclosure of annuity benefits and charges, despite the fact that variable annuities are the only type of annuity with an explicit fee structure. Surrender penalties and other such policy provisions are clearly disclosed in all fixed-annuity contracts sold.
It appears that Mr. Ketchum is ignorant about fixed-annuity regulation.
Sheryl J. Moore
President and chief executive
Advantage Group Associates Inc.
Des Moines, Iowa
