SEC Custody Rule Plan Would Hurt Annuity Access: IRI

The Securities and Exchange Commission’s new custody rule plan would “inadvertently impair” RIA clients from obtaining lifetime income products — including annuities — through advisors, according to the Insured Retirement Institute.

How? The SEC’s plan “imposes stringent requirements related to custody of investor assets on products under which no investor assets are actually in the custody of the RIA or the insurer,” which includes annuities, Jason Berkowitz, IRI’s chief legal and regulatory affairs officer, told ThinkAdvisor on Tuesday in an email.

The SEC’s proposed Safeguarding Advisory Client Assets rule would broaden the application of the current investment advisor custody rule beyond client funds and securities to include any client assets in an advisor’s possession or when an advisor has the authority to obtain possession of client assets.

IRI told the SEC in its comment letter that the plan should be altered to include an “exception to the proposed rule’s qualified custodian requirement that effectively modernizes current SEC guidance that allows insurance companies to act in lieu of a qualified custodian in connection with all contract types.”

The comment period on the plan expired Monday. The agency has received significant pushback on the proposal.