July 16, 2008
In response to the SEC proposed Rule 151a, I am in total disagreement to the proposal for the following reasons.
1. The FIA is a fixed product and people purchase the product for many of the same reasons people purchase savings instruments such as fixed annuities and CDs.
2. Unlike true security products, the purchaser is not directly impacted by market fluctuatons. Negative impact to customer is eliminated enirely.
3.FIA purchasers assume the benefits and rewards of a FIXED annuity. Market fluctuations do NOT affect principle vaue or past credits to the contract.
4.In most states suitability regulations and the sales practices required by insurance companies already meet or EXCEED the federal requirements.Complaint resolution through a department of insurance is much more effective than that provided by security law.
5.The complaint rate on FIAs according to the Advatage Compendium is one complaint for every $109 MILLION in sales. The compensation over the life of any annuity contract is actually less than that of an investment advisor.
6.In case law regarding the evaluation of whether an FIA is a security, according to the findings of the judge in Malone verses Addison Ins. Marketing, an FIA is NOT a SECURITY.
7.This rule will reduce competition and harm consumers. If adopted, only consumers who open brokerage accounts may access an FIA.
8.Costs of creation and administration of the product will increase dramatically and reduce the value for FIA purchasers.
9.The forseen negative economic to small agencies within the insurance industry violates the Small Business Regulatory Enforcement Fairness Act of 1996.
10.The SEC is being influenced by security dealers through FINRA who are seeking to gain control of additional sales volume to increase their revenue. This is clearly NOT about consumer protection as those protections are already in place with each state department of insurance.
11.I recently voluntarily relinquished a Series 6 because of the limitations in regards to what I could offer my clients as an independent agent. The load fees associated with the security products can be excessive over a period of time and not clearly understood by the purchaser. Prospecteses are left but very rarely ever read or even looked at. The disclosure forms and appropriate product broshures and other sales literature provided by the FIA companies are more consumer friendly and more easily understood.