Outside business activity - trouble ahead

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Sep 13, 2005 9:46 pm

My B/D (large indy) has recently been requesting more information
regarding rep's outside business activities.  Specifically, the
sales of equity indexed annuities.  Our compliance department is
not only requesting what companies reps are writing EIA business
through but what type/name of policy is actually being used.  Even
though our B/D does not have a selling agreement with a company, they
are placing  policy types in approved, under review and not
approved categories.  They apparently are trying to follow the
recent NASD mandate and also perhaps trying to grab some of the
business rather than having it placed through other outlets.  I
would be happy to place business through my B/D but their EIA product
lineup ranges from terrible to really awful.  Ie, 10-12 year cdsc
charges with high commission payouts or products from "favored"
companies that aren't competitive.



I've heard many reps are simply ignoring their B/D requests for
information, writing business as usual.  My questions are: since
there hasn't been a clear decision on whether EIA's are securities
rather than fixed annuities, do the B/D's have the right to dictate in
this manner to the rep's?  What could the potential downside be
for the reps selling EIA's that aren't on their B/D's approved lists or
for the reps that aren't telling their B/D's about their EIA
sales.  Does  anyone have any estimate on timelines on when
EIA's will eventually be declared securities or remain insurance
products??