SEC Redefines Insurance Suitability Qualifiers for Certain ProductsPosted January 11th, 2012
The SEC recently redefined the accredited investor standard that is used to determine whether individuals are permitted to purchase insurance products such as Variable Universal Life (VUL) policies and Variable Annuities (VA) that permit investment in exotic, high-risk products such as hedge funds and private equity. The new definition effectively increases the net worth at which an investor may qualify to purchase these riskier products.
Under the amended rule, an investor’s principal residence is excluded from the net worth calculation. Individuals (or married couples) are qualified as accredited investors under the rule if they have a net worth of at least $1 million, excluding the value of the investors’ principal residence. The rule was motivated in part by inappropriate marketing efforts that may have targeted families that, due to the inflated housing market, were “house rich” but who lacked the investing sophistication to fully understand the exotic products that they were purchasing.
What does the rule mean for your clients and prospects? For starters, the rule will re-establish the cache of private placement insurance products and help move them back into the exclusive realm of the advanced markets producer.