Equity – Indexed Securities – Not Safe for Most Senior Investors: Investment/Securities Law Update

Stockbroker Law - Tuesday, November 20, 2012
Equity – Indexed Securities – Not Safe for Most Senior Investors: Investment/Securities Law Update

Equity-Indexed Annuities are complex financial instruments that have characteristics of both fixed and variable annuities.  The return earned by investors on equity-indexed annuities can fluctuate –  returns are not fixed or guaranteed and thusly carry more risk than a fixed annuity.  Many investors are not clearly made aware of this fact at time of purchase.


While equity-indexed annuities usually offer a minimum guaranteed interest rate, any such purported guarantee returns are only as good as the insurance company backing it.  Additionally, if you cash out of (surrender) and equity-indexed annuity before its maturity date, significant surrender charges, as well as a 10% tax penalty, could substantially diminish any return an investor might otherwise have expected on an equity-indexed annuity. 


Interest rates and rates of return on equity-indexed annuities can be calculated by any number of ways, including participation rates (percentage participation in appreciation of a particular index), spread/margin/asset fee (calculated by reducing the performance of the underlying index by spread/margin/asset fees and costs) and interest rate caps (annuity contract caps can limit of your return, generally stated as a percentage) being the maximum rate of return an investor might possibly earn.


These various methods of calculating the return associated with an equity-indexed annuity are complicated and require considerable assessment before investing.


Equity-indexed annuities are generally designed to be long term investments.  Unfortunately, some unscrupulous brokers and sales persons have sold equity-indexed annuities to investors clearly in need of cash flow in a short term.


Also, investors should understand that it is possible to lose money in equity-indexed annuities.  For example, if the indexed linked to your annuity declines or if you surrender your equity-indexed annuity before maturity.


If you feel you have been victimized by the improper sale of an equity-indexed annuity, we offer a free initial consultation.


The Law Offices of Timothy J. O’Connor is one of the only law firms practicing securities law in the Tri-City Capital District of Albany, Schenectady and Troy.  We also represent victimized investors throughout the rest of New York State, including Buffalo, Binghamton, Syracuse, Watertown, Utica, Kingston, New York City/Manhattan, Long Island, and everywhere in between, as well as in the surrounding states of Massachusetts, Vermont, New Hampshire, Connecticut, and New Jersey.



Blog Posts

Blog Post


Investment & Broker

Investment Misconduct



Private Company

Private Company Disputes


Personal Injury