ICI Reiterates Concerns with NASD Deferred Variable Annuity Proposal

Washington, DC, July 19, 2006 - The Institute reiterated its support for the goal of NASD's proposed Rule 2821, which addresses sales practices of deferred variable annuities, but expressed reservations with the self-regulatory organization's approach, in a recent comment letter.

Background
In September 2005, the National Association of Securities Dealers, Inc. (NASD) proposed to create a new rule, NASD Rule 2821, that would impose new requirements on NASD members who recommend the purchase of deferred variable annuities, and would require registered principals to review and approve variable annuity transactions, among other things.

More recently and as recommended by the Institute, NASD amended the proposal to eliminate a provision that would have required members to have a reasonable belief that the customer had a need for the deferred variable annuity "as compared with other investment vehicles."

ICI Position
While the Institute supports the goals of NASD's proposal, ICI reiterates points made in its September 2005 letter: that the proposal sets a bad precedent by establishing a separate regulatory framework for one particular product. Most significantly, ICI states that NASD's approach could lead to the adoption of separate and distinct suitability rules for other complex products. ICI also questions whether a separate rule is necessary to accomplish NASD's goals.

Related Links
A section of this website is devoted to financial services issues.