Needham, Mass. - In June 2008, the U.S. Securities and Exchange Commission (SEC) released a proposal to reclassify the annuity products referred to as fixed indexed annuities or equity indexed annuities (indexed annuities) as securities. New research from Needham, Mass.-based TowerGroup Inc. finds that this proposal has far-reaching implications for the insurance companies and agents selling the products.

Indexed annuities have offered investors a middle-ground option between low-return fixed annuities and market-volatile variable annuities, according to TowerGroup. However, the ambiguity in the way the products are regulated has led to lawsuits over unfair sales practices. If the SEC's proposal (Rule 151A) to reclassify indexed annuities as securities products is enacted, these vehicles will be subject to regulatory requirements similar to those for variable annuities and other securities investments.

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