SIE Exam Question 212: Answer and Explanation

Question: 212

Which of the following can be defined as a security?

• A. Fixed annuities
• B. Variable annuities
• C. Individual retirement accounts (IRAs)
• D. All of the above

Correct Answer: B

Explanation:

A security must be transferable from one individual to another and exposes the owner to risk and loss. Variable annuities are securities because they are transferable and, due to their payments being varied and unpredictable, expose the owner to some financial risk and variability in returns. Fixed annuities are not securities in that they provide for fixed payments, a guarantee on the receipt of earnings and principal, and consequently, no risk to the owner. Individual retirement accounts (IRAs) are not considered securities in that they provide for regular and predictable distributions to the owners, and thus, no risk.