FINRA Sets Sights on Registered Index-Linked Annuities

Similar to other structured products, Cook said FINRA's focus on RILAs are threefold:

Ensure clear disclosure. "Customers need to understand the complexity of a structured product, and the registered rep needs to understand and disclose the inner workings of the product," Cook said.

Over-concentration and lack of liquidity. "Where surrender periods could be anywhere from five to 12 years, that could be an issue for certain types of investors with limited liquidity sources," Cook stated.

Understand the product's return on investment. The customer needs to understand "that the products may offer a lower return due to these caps; there's a trade-off."

Consumers need to know "that while there's a guarantee about the loss of investment, the potential return might be lower." Also, "if a customer is being moved into these products from other annuities with existing potentially strong income benefits and making sure the customers have relevant information there."

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