What are the SEC Rule Changes?
Two recent developments in the investing world are generating interest in annuities. First, the SEC made it easier to compare and understand certain registered annuities that link performance to a market index (often called RILAs, short for registered index-linked annuities). Second, the SEC reminded investment advisers how they can, and can’t, market performance when they talk about retirement strategies.
What Do These SEC Changes Mean for You?
If you’re shopping for income and principal protection, you’ll likely see these products next to fixed index annuities (FIAs). The rules don’t turn FIAs into securities or hand them over to the SEC. But they do raise expectations for clarity, comparisons, and plain-English explanations. That’s good for you.
Are fixed index annuities categorized as securities now?
No. Traditional FIAs remain insurance products regulated by state insurance departments, not by the SEC. An FIA credits interest based on an index (like the S&P 500) using limits such as caps or participation rates, but it protects your principal from market losses as long as you follow the contract rules. That basic structure hasn’t changed.
Then what’s a RILA, and how is it different from an FIA?
Think of a RILA as a “cousin” to an FIA. Both tie potential growth to a market index, but a RILA typically includes downside risk. For example, you might choose a “buffer” that absorbs only part of a loss. Because of that risk, RILAs are securities and must provide standardized disclosures (more like mutual funds or variable annuities).
When you compare an FIA to a RILA, you’ll likely see clearer, apples-to-apples documents for the RILA. That transparency raises the bar for how agents and advisers explain any annuity, even those not filed with the SEC. Expect sharper explanations of trade-offs: growth limits vs. guarantees, risk vs. protection, liquidity vs. surrender charges.
Does the SEC’s “best interest” standard apply to my annuity purchase?
It depends on who’s helping you and which product you’re buying.
- If you work with a broker-dealer recommending securities (such as a RILA or a variable annuity), they must follow the SEC’s Regulation Best Interest (Reg BI).
- If you’re buying a traditional FIA from an insurance producer, your state’s annuity best-interest or suitability rule applies.
Either way, the theme is similar: your needs, goals, and risk tolerance should drive the recommendation, not the other way around. Don’t be shy about asking, “Which standard are you using with me today, and why does this product fit my situation?”
How do the SEC’s marketing reminders affect me as a shopper?
The SEC’s marketing rule is aimed at investment advisers. It tightens how advisers can present performance, especially hypothetical or back-tested numbers. Why should you care? Because retirement strategies often compare “with annuity” vs. “without annuity” outcomes. When advisers talk about strategies that include annuities, they must avoid cherry-picking and explain assumptions.
Your move: whenever you see performance charts or “what if” projections, ask for the assumptions, fees, and limits (caps, spreads, participation rates), and whether losses are possible. If something looks too smooth, it probably rests on assumptions that deserve a closer look.
Are states changing the rules for annuity sales too?
Most states have adopted an updated best-interest standard for annuity recommendations. For you, that means more documentation of your financial situation and goals, better training for agents, and clearer explanations of why a specific product is being suggested. It’s meant to keep the focus on fit, not just features.
Bottom line
You should see better explanations from professionals, clearer documents for registered products, and growing pressure for plain-language comparisons across the board. Your best defense is still a good offense though. You should ask direct questions, compare more than one carrier, and make sure the recommendation aligns with your time horizon, risk comfort, and income needs.
Use the new clarity to your advantage. Get side-by-side comparisons, understand the give-and-take between protection and growth, and choose the product that fits your goals.
Plan Your Retirement with Confidence
At Crosby Insurance Group, we offer comprehensive retirement planning services including indexed annuities that are designed to protect your assets, maximize income, and ensure long-term financial security.
Serving Charleston, Mount Pleasant, Isle of Palms, Sullivan’s Island, Beaufort, Hilton Head, and surrounding areas our team understands South Carolina’s unique retirement and insurance landscape. Whether you’re just starting to plan or reviewing your portfolio, we’ll help you make informed, confident decisions for your future. Learn more when you read our blog: Insurance Changes You Need to Make After Retirement.
Frequently Asked Questions About the SEC and Annuities
Are fixed index annuities now under the SEC?
No. Traditional FIAs remain state-regulated insurance products. The SEC’s recent actions improved how certain registered annuities (like RILAs) disclose information, which indirectly raises the clarity you should expect across the board.
Can I lose money in an FIA?
FIAs are designed to protect your principal from market losses if you follow the contract rules. You can still lose value if you surrender early or take withdrawals that trigger charges or market-value adjustments.
Why do RILAs get so much attention in the news?
Because they’re securities with both upside potential and some downside exposure. The SEC’s rules push clearer, standardized disclosures, so shoppers can better understand risk and reward. That makes them easier to compare and puts pressure on everyone to explain products plainly.
How do caps and participation rates affect me?
They limit how much index gain gets credited to your contract. A 6% cap means that if the index rises 10% over the crediting period, you get up to 6% (before any applicable fees). Participation rates multiply gains (e.g., 50% participation on a 10% index gain would credit 5%). These levers can change, so ask how often and by how much.
What questions should I ask before buying?
- What problem is this annuity solving for me?
- What are the downsides and trade-offs?
- How long is the surrender period, and what are the penalties?
- How do caps/participation/spreads (FIA) or buffers/floors (RILA) work in my example?
- What are all fees and charges, including riders?
- Which standard governs our recommendation today (state best interest or Reg BI), and why?
