The SEC’s Office of Investor Education and Advocacy has placed on its website ( an Investor Bulletin providing information on features of indexed annuities. The Investor Bulletin, which principally provides information concerning the computation of the index-linked interest rate and potential limitations on an individual investor’s realization of the full interest rate, states that “you should understand how each feature works and what impact … it may have on the annuity’s potential return.” In addition, the Bulletin contains numerous warnings, such as “you can lose money” and “[c]ircumstances may arise where the insurance company is unable to pay its obligations.”  

The Bulletin does not refer to the status of indexed annuities (or indexed life insurance) as securities or insurance. Some observers find this curious, since the SEC has not yet announced how it will administer the Harkin Amendment’s conditions for the treatment of an indexed product as insurance rather than as a security. Moreover, as some indexed products are currently registered with the SEC as securities, the Bulletin seems to stop short of providing a full picture to investors.

The Bulletin’s genesis is something of a mystery. One view is that SEC Chairman Mary Schapiro originated the Bulletin, given her stated view, while head of FIN RA, that indexed annuities should be treated as securities. The Bulletin concludes with a statement that “[i]t is neither a legal interpretation nor a statement of SEC policy.”  

See “Regulators Warn About Structured Notes with Principal Protection” on page 15 about a joint Investor Alert that the Office of Investor Education and Advocacy and FIN RA have recently issued concerning a type of security that has many similarities to indexed annuities.