An annuity is a contract between the contract owner and the insurer. In return for the purchase payment from the contract owner, the insurer agrees to pay either a regular stream of income or a lump sum at some future time. There are four parties to an annuity: the insurer, the contract owner, the annuitant, and the beneficiary. The insurer sells the annuity to the contract owner and receives the purchase payments. The contract owner buys the annuity from the insurer, makes the purchase payments, and names the annuitant and beneficiaries. The annuitant receives the payments out of the annuity and is the “measuring life” when the annuity is a lifetime annuity. The beneficiary receives the contract value, if any, when the annuitant dies. There are two phases of an annuity: the accumulation phase where money is paid into the annuity, and the distribution phase where money is paid out of the annuity. The annuity can be funded by a single payment or by flexible payments over time. The funds inside a variable annuity may be invested in various securities by allocating the funds into sub-accounts. Variable annuities normally come with many charges and fees, including a surrender charge for withdrawal of funds prior to the expiration of a specified period of time. In addition, variable annuities often provide substantial commissions to the brokers who sell them. The surrender charge, potential tax consequences, and other characteristics of variable annuities make them suitable only for long-term investors who do not have a need for liquidity. FINRA has issued an Investor Alert regarding variable annuities titled Variable Annuities: Beyond the Hard Sell. FINRA has also issued guidance to broker-dealers regarding their obligations with respect to the sales of variable annuities. See FINRA Notice to Members 99-35 and FINRA Notice to Members 00-44.