New Hampshire Disclosure Issue Rakes Up EIA Questions

Barry Glennon, an attorney and deputy director with the Bureau of Securities, explains the Bureau's position this way: EIAs are not regulated by the Bureau of Securities, he says. But "from a pure sales perspective, they may have more the appearance of a securities product than perhaps a variable annuity."

Both EIAs and VAs "remain and should be sold as insurance with certain guaranteed benefits," Glennon continues, adding "both are complex products, and important information regarding charges and risk need to be addressed with the prospective purchaser."

Rogers, who served as New Hampshire insurance commissioner for 6 years, says she did visit the Bureau to discuss, on behalf of Kutcher, why the RSA requirement was applied to Kutcher's insurance advertising. The Bureau said it wants to prevent customer confusion, part of which requires revealing broker-dealer relationships upfront, she says.

The Bureau has since proposed removing 2 words ("and equally") from the state's current broker-dealer and B-D agent sales and advertising disclosure requirements. The amendment is found in HB 716-FN. It will align the New Hampshire rule more closely with current NASD requirements, contends Glennon. "Our primary concern is that clients understand the selling agent's relationship with the various financial services companies they represent, through disclosure on sales and advertising pieces."

Kutcher views the Bureau's proposed change as awkward and non-conducive to rational disclosure since it would still require B-D disclosure on insurance ads, says Rogers. That would confuse customers, she maintains. "For instance, what if a dual-licensed agent starts selling an LTC policy?" Because of that, Kutcher sought, and obtained, sponsorship of a bill (SB 111) that would require point-of-sale disclosure of the appropriate business relationships, she says. Such disclosure would be more meaningful for consumers, she contends.

Both sides have told NU they want a workable outcome–a disclosure rule that strengthens consumer understanding. So, discussions are continuing.

In the air hangs a question regarding how the proposals are viewed by the State of New Hampshire Insurance Department. At press time, the commissioner was at a National Association of Insurance Commissioners' zone meeting and was unavailable for comment on the issue.

Kutcher, who stopped advertising for 9 months, has since received a Bureau letter allowing him to advertise, says Rogers.

"From a pure sales perspective, equity indexed annuities may have more the appearance of a securities product than perhaps a variable annuity," says the deputy director of New Hampshire's Bureau of Securities