Stockbroker Law - Tuesday, February 09, 2016
SEC Issues Investor Bulliten on Variable Annuities

On November 5, 2015 the Securities and Exchange Commission issued an Investor Bulletin entitled “Variable Annuities – An Introduction.” This publication of the SEC Office of Investor Education Advocacy follows on the heels of prior publication of the Financial Industry Regulatory Authority (FINRA) including Regulatory Notices and Investor Alerts warning investors about the pitfalls of investing in a variable annuity.

This Investor Bulletin notes the following potential downsides:

  • Short-term investors should never purchase variable annuities as early withdrawals subject the investor to penalties, surrendered charges and taxes.
  • Unlike a fixed annuity, variable annuities are not guaranteed products as their underlying sub-accounts are subject to fluctuations in the financial markets.
  • Variable annuities are also subject to complex tax rules and consequences.
  • Features such as living benefits may be illusory and complex and small investors looking for life insurance might be better off purchasing inexpensive term insurance.

Variable annuities are investment products, comprised primarily of mutual fund sub-accounts, and also have certain insurance features. In reality, less than five percent (5%) of all variable annuity investors ever properly annuitize payment streams from their variable annuities while paying upfront purchase commissions (loads) and annual combined fees expenses and charges which are amongst the highest in the financial markets.

We offer a free initial consultation to investors who feel they have been victimized by being invested in variable annuity products. For a free initial consultation contact the Law Offices of Timothy J. O’Connor at (518) 426-7700.


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