August 28, 2008
Florence Harmon
Acting Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0609
Florence Harmon:
I am a licensed insurance professional as well as a registered representative with a very fine independant broker dealer who supervises my selling activities very well. I appreciate their efforts and dilligence in assisting me as I navigate the mind boggeling amounts of paperwork involved in trying to stay compliant. Most of the compliance effort is counter productive and a real disservice to the buying public. You can't legislate and regulate honorable character, you can only reward the presence and punish the abscence of it. It may be more productive to do a better job of screening potential applicants up front and not have to do so much chasing down after the fact. I am very much in favor of punishing the bad guy and requining better education up front to minimize problems, but really the responsibility should be equally shared by regulator and regulated alike. I do not support the adoption of proposed Rule 151A, which would classify most indexed annuities as securities. In addition, I am concerned that the application of proposed Rule 151A would not be limited to indexed annuities and that other annuity and insurance products that happen to fit the criteria set ou
t in the rule would be brought within the scope of the rule. I urge you to withdraw the proposal.At the outset, let me clearly state that I firmly believe that people who promote unsuitable sales and engage in misleading sales practices should be aggressively prosecuted and subject to meaningful sanctions. However, concerns about suitability, disclosure and marketing methods, however valid, are not the relevant criteria for determining whether a financial product is or is not a security. Properly structured indexed annuities do not share the same investment risk as investment products such as mutual funds and individual stocks, since with an indexed annuity the risk of a downturn in the related index rests with the issuer of the product and not the consumer.
In my opinion indexed annuities should continue to be treated as insurance products, and the state insurance regulatory structure is the appropriate means for addressing the concerns raised by the SEC. The professional organization I belong to, the National Association of Insurance and Financial Advisors, is committed to working with the NAIC and state insurance commissioners towards the goal of having every state adopt and vigorously enforce the NAIC's model regulations on annuity suitability and disclosure. I also support NAIFA's recommendation that a state regulatory body be designated to develop standards for indexed annuity product design so that inappropriate indexed annuity products would be prevented from reaching the marketplace.
For these reasons, I urge the SEC to withdraw the proposed rule. Thank you for your consideration of my views on this matter.
Sincerely,
Marvin R. Reynolds ChFC, LUTCF