Phillip Wasserman was asked to comment on the 2011 SEC Rule 151A. Here is an excerpt from the article:
Appropriately, a large portion of the present debate regarding the status of indexed annuities centers on risk. It must be admitted that, undoubtedly, purchasers of indexed annuities will always bear some risk. This fact alone, however, is not enough to cause an annuity to be classified as a security. It is not the existence of risk that causes annuities to be classified as securities; rather, it is the degree of risk combined with who bears the risk that determines the status of the annuity. American Equity believes that the SEC’s interpretation of indexed annuities in the context of Rule 151A misses this point, as the SEC seems to require the insurer to bear all the risk. In fact, however, some people purchase indexed annuities to avoid the volatility of the equity market. To emphasize this point, in an amicus brief Phillip Roy Financial Services, LLC and Phillip Wasserman stated:
Under the Commission’s logic, an FIA owner with a guaranteed minimum and a prospect of higher gain is involved in a more risky venture than an annuity holder with the same guaranteed minimum but no prospect of further gain. Apparently, the FIA owner runs the unacceptable risk of more than likely making more money than he’s been promised, and therefore needs the protective arms of the SEC. One could not fall through the looking glass and find a more absurd argument.
Brief of Amici, Phillip Roy Financial Services, LLC and Phillip Wasserman In Support of Petitioners, Issue II, Page 13, American Equity, 572 F.3d. at 925.
In American Equity’s opinion, by indexing returns, indexed annuities are “fixed.” Regarding the returns, there is no one for the SEC to regulate; the index is what it is. The fact that performance is tied to a security does not mean that indexed annuities are actually securities.