COMPLEXITIES OF REGISTERED INDEX-LINKED ANNUITIES (RILA'S) DRAW ATTENTION OF SEC, SO HEADS UP, SERIES 6 CANDIDATES!

Several blogs ago, I discussed RILA's, or Registered Index-Linked Annuities. FINRA's Series 6 Content Outline lists Annuities under Section 3.2, meaning that the Series 6 Exam covers these alternative investments and asks questions about them. Today on the SEC website, I see that the SEC is paying close attention to the complex structure and details of RILA's in its SEC OIAD Report on Activities—Fiscal Year 2023. Here is just one paragraph from this SEC publication in regard to RILA's. I intend to present more segments in future blogs from this SEC Report on RILA's.

"REGISTERED INDEX-LINKED ANNUITIES (RILAs) 

"What Are RILA's and How Do They Work? 

"RILA's are tax-deferred retirement savings vehicles that advertise potentially reduced market risk relative to investing directly in financial markets. Like many other retirement savings vehicles, money is first added to the overall vehicle and then the investor allocates that money to specific investments. Unlike many other retirement savings vehicles, because of their structure, withdrawal penalties, and other features, RILA's are complex, long-term, and illiquid products that typically require investors to make a significant number of complicated decisions with perhaps unintuitive consequences. 

"Investors fund purchases of a RILA contract through premium payments; the initial minimum amount required to purchase a RILA varies substantially from $10,000 to $25,000. Premium payments and investment earnings are allocated by the investor to investment options. These investment options are shorter-term investments that often last 1, 3 or 6 years (a period typically referred to as the “investment term” or “term”); as such, these investment options may not individually last as long as the RILA contract itself. Thus, the investor may need to pick investments several times over the life of the contract."

"https://www.sec.gov/files/2023-oiad-annual-report.pdf"

From the above SEC discussion of RILA's, one sentence especially bears re-reading:

"Unlike many other retirement savings vehicles, because of their structure, withdrawal penalties, and other features, RILA's are complex, long-term, and illiquid products that typically require investors to make a significant number of complicated decisions with perhaps unintuitive consequences." 

Note that this comment implies that the SEC and other financial authorities will not take lightly the wholesale recommendation of these RILA's to clients.

Candidates for the Series 6 should therefore study the structure of RILA's and their complexity before taking the exam, or recommending them to clients after becoming registered.

Bob Eder discusses RILA's and Indexed Annuities in his Study for the Series 6 Exam.

Here is the link to FINRA's Content Outline for the Series 6 Exam. 

See the references to Registered Index-Linked Annuities in FINRA's Series 6 Content Outline, Section 3.2

Study for the Series 6 Exam is available from Amazon in both paperback and Kindle e-book versions. 

Here is the link to Bob Eder's Study for the Series 6 Exam on Amazon.

See Bob Eder's Author Page on Amazon.com.

For questions about Bob Eder's Study for the Series 6 Exam, or questions in general about the Series 6 Exam, or about Registered Index-Linked Annuities (RILA'S), simply email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001.