Equity Indexed Annuity Attorneys — Bakhtiari & Harrison

Written and reviewed by

David Harrison, Partner — Bakhtiari & Harrison

Admitted: CA | NY · Super Lawyers 2015–2026 · Former NYC Assistant District Attorney · Former Morgan Stanley In-House Counsel · Series 7 Licensed · Last reviewed: May 2026

Bakhtiari & Harrison represents investors in equity indexed annuity (EIA) — also called fixed indexed annuity (FIA) — fraud and unsuitable recommendation claims in FINRA arbitration and insurance regulatory proceedings nationwide. Equity indexed annuities are insurance products whose credited interest is linked to the performance of a stock market index such as the S&P 500, subject to participation rates, caps, and spreads that severely limit the investor’s actual upside while marketing materials emphasize the index connection. They are sold as offering stock market participation without stock market risk — a representation that fundamentally mischaracterizes how these products actually work. David Harrison is a former Morgan Stanley Dean Witter in-house counsel who began his career as a Series 7-licensed registered representative at Shearson Lehman Brothers. Investor cases are handled on a contingency fee basis — no recovery, no fee.

How equity indexed annuities actually work

An equity indexed annuity credits interest based on the performance of a stock market index — most commonly the S&P 500 — but with three critical limitations that dramatically reduce the investor’s actual return relative to the index: participation rates, caps, and spreads.

Participation rate: the percentage of the index gain that is credited to the annuity. A participation rate of 70% means the investor receives only 70% of the index’s gain — if the S&P 500 rises 20%, the investor is credited with 14%.
Cap rate: the maximum interest that can be credited in any period, regardless of how much the index rises. A cap of 8% means the investor receives no more than 8% even if the index rises 25%.
Spread/margin/asset fee: a percentage deducted from the index return before crediting. A 3% spread means a 10% index gain produces only a 7% credit.

These limitations mean that EIA investors rarely receive returns anywhere near the index return — while being told they are participating in stock market performance. The “floor” of 0% (no loss of principal when the index declines) is real, but it is purchased at the cost of severely limited upside participation.

EIA misconduct claims

Misrepresentation of index participation: representing EIAs as providing stock market returns without adequately explaining participation rates, caps, and spreads is a material misrepresentation.
Unsuitable recommendations: EIAs have surrender periods of 7-10 years with substantial surrender charges. Recommending EIAs to investors who need liquidity, who are elderly, or whose time horizon does not accommodate the surrender period is a suitability violation.
IRA and retirement account placement: placing EIAs in IRAs or other tax-advantaged accounts provides no incremental tax benefit while adding the product’s costs and surrender period — the same unsuitable pattern as variable annuity IRA placement.
Failure to explain the floor mechanics: the “no loss” floor in most EIAs applies to the base premium — not to accumulated value including previously credited interest. In some product designs, the investor can effectively lose credited gains while retaining only the original premium.

EIAs and securities regulation

Whether an EIA is a security subject to FINRA regulation or an insurance product subject only to state insurance regulation depends on its specific design. Fixed indexed annuities are generally classified as insurance products — meaning claims against sellers who hold only insurance licenses are pursued through insurance regulatory channels rather than FINRA arbitration. However, when an EIA is sold by a FINRA-registered broker-dealer or a dually licensed agent, FINRA arbitration may be available. Bakhtiari & Harrison evaluates the regulatory status of each EIA and the appropriate forum for each claim.

Frequently asked questions — equity indexed annuities

My EIA earns 0% when the market declines — is that a benefit?

The 0% floor is a genuine benefit compared to direct stock market exposure. However, investors pay for it through the participation rate, cap, and spread limitations that reduce their upside. The question is whether the overall trade-off — limited downside protection in exchange for severely limited upside — was appropriate for your financial situation and was adequately explained before you purchased. equity indexed annuity attorney

Can I file a FINRA arbitration claim against an EIA seller?

It depends on whether the seller was FINRA-registered. If the EIA was sold by a FINRA-registered broker or broker-dealer, FINRA arbitration is available. If sold by a pure insurance agent without FINRA registration, claims must be pursued through state insurance regulatory channels or civil litigation. Bakhtiari & Harrison evaluates the appropriate forum in the initial consultation.

My EIA surrender period is 10 years — I cannot get my money out. What are my options?

If the EIA was unsuitably recommended — because the surrender period was inconsistent with your financial needs — you may have a claim for the cost of the surrender charges and any other damages caused by the illiquidity. Contact Bakhtiari & Harrison for a free evaluation before paying surrender charges to exit.

For a full overview of the firm’s investment product failure practice, visit the Product Failure page.

Contact a equity indexed annuity attorney — free consultation

Contact Bakhtiari & Harrison for a free, confidential consultation. Our FINRA attorneys evaluate every potential investor claim at no charge. Investor cases are handled on a contingency fee basis — no recovery, no fee.

Investor cases are handled on a contingency fee basis — no recovery, no fee.

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