Subject: File No. S7-14-08
From: Steve Fullerton

August 31, 2008

I am an Arizona state licensed independent insurance agent. I strongly oppose the proposed rule change (151A) recently requested by the Securities and Exchange Commission related to Fixed Indexed Annuities (FIA). Such a change would significantly impact my livelihood and business.

I would suggest the follow

Contrary to what the SEC suggests, the majority of people do not purchase an FIA as an investment, they purchase it for a savings vehicle for the SAFETY and the guarantee that they will never lose their principle and/or locked-in interest.

The SEC claims that the purchase of a FIA is inappropriate for the senior market. I would suggest, in most cases, just the opposite. First, each individual has different needs, objectives and goals. To indicate that any financial tool is appropriate or inappropriate for everyone (senior market) is absurd, that includes FIA. Each situation needs to be evaluated independently. For a majority of seniors, their participation in the unstable and volatile stock market is much less appropriate than a FIA. Within the past month, I have sat with several seniors in the market and others in mutual funds who have lost 20% of their retirement assets in the past 6 months. In the market, there are absolutely no guarantees and the senior bears all of the risk The FIA allows the seniors to participate in the positive market (gains) and NEVER in the negative market.

With the FIA, the senior bears no risk, the risk is held by the Life Insurance company. With all FIA, there are guaranteed minimum values which are regulated through the Standard Non-forfeiture Law. Unlike a security, those guarantees provide the goal of most seniors, peace-of-mind.

As a result of the FIA issued by insurance companies, billions of dollars that have been taken out of brokerage accounts. I find it unsettling and upsetting to know that a broker, (no one has a crystal ball to know the future) registered with the SEC, can put a senior, intentionally or unintentionally in an investment (security) of which the senior bears ALL THE RISK. That investment has no guarantees. If that senior loses a large portion or all of their only retirement assets, it requires immediate and significant life style changes.

FACT-Worse case scenario with a FIA, the senior decides to violate the length of the contract (maybe due to an unanticipated life circumstances), there is a surrender charge (disclosed by the agent prior to sale and in the FIA contract). The surrender fees are dependent on the contract length, but typically between 12% to 15% and decline every year of the contract. Certainly the surrender fees are not desirable but it is understandable. It needs to be understood, with a FIA, the consumer pays no commissions to the agent, they are paid by the insurance company issuing the FIA. Conversely, in the market, there are fees whether the market is up or down, including as in the last 6 months, the average 20% lose. The SEC fails to acknowledge their unsuitable investment practices for the senior market, the risk is ALL on the senior-they could lose it all

The best time to own an FIA is in markets like today because with a 20% decline with the stocks and mutual funds today, my clients (including my own mother) and my own FIAs has not lost one dime. When the market turns upward, and it will (who knows when), my FIA will also receive positive gains.

The SEC suggests abusive sales practices are fueled by outsized commissions. The facts indicate that there is one 1 complaint for every $109 million in sales according to the Advantage Compendium. Over the life of any annuity contract, the compensation is actually less than that of an investment advisors. Take note, every dollar of a clients FIA, goes to work for them from day one.

If the SEC recommendation is implemented, it will cause a negative economic impact to small agencies within the insurance industry, in excess of $100 million. That would be a violation of the Small Business Regulatory Enforcement Fairness Act of 1996.

Implementation of the proposed rule change will provide no additional protection for consumers. Currently, state insurance regulations mandates disclosure statements and documentation describing all important terms and conditions of the annuity including prominent disclosure of surrender charges, in addition to suitability reviews on all FIA sales.

Risk, fees, and volatility are components of the market and securities. Guarantees, safety and security are the components of a FIA. The SEC recommendation is inappropriate and should not be implemented.