Subject: File No. S7-14-08
From: Dee K Carter, CLU, ChFC, RFC
Affiliation: Past President, Texas Association of Insurance and Financial Advisors, 2000-01

July 10, 2008

In my 35 years of practice in the insurance and financial services industry, I have never seen such a mis-guided and uninformed decision coming from the SEC. There are some obvious (to those of us who have been working in this field for as many years as I have) differences between "risk" and "guaranteed" financial instruments. I am strongly in favor of the SEC overseeing those instruments and companies who market and sell "risk" investments, but to extend your oversight to the "guaranteed" area is an over-extension. There are reasons that I feel this way:

1. People do NOT purchase fixed indexed annuities for the same reason that they purchase variable products. In fact, all of my clients who have purchased fixed indexed annuities, fixed annuities or life insurance do so to AVOID the risk element inherent with variable products.
2. The purchaser of a fixed indexed annuity does NOT bear the risk of a fluctuating market. . .THE ISSUING COMPANY BEARS THAT RISK. There is NO negative investment risk to the purchaser of fixed indexed annuities.
3. Purchasers of fixed indexed annuities assume the BENEFITS AND REWARDS of a fixed annuity, but none of the risk of a downside market
4. In Texas, we are heavily controlled by the Texas Department of Insurance in regard to sales practices and disclosures. They do a tremendous job in overseeing the activities of licensed representatives in this State. And, as Past President of NAIFA-Texas, I can add that the agents, themselves, do a tremendous job of assisting the Department in regard to overseeing these activities. We do not need the SEC or any other Federal agency in the oversight business here in Texas.
5. While I am sure that there are abuses by a small percentage of agents, the fact is that there are fewer complaints by consumers who purchase fixed indexed annuities than complaints from purchasers of variable products. In regard to commissions, as a Series 6 and 65 representative, I earned a great deal more in commissions from the sale of variables, over the life of the investment, than I have EVER earned selling a fixed indexed annuity. . .but the service to my clientele is the same, regardless of how long the term of the investment.
6. What were the Judges findings in this situation? This is never mentioned by the SEC. In the case before the court, Malone vs. Addison Insurance Marketing, the judges ruled that a fixed indexed annuity is NOT A SECURITY. How can you now decide, arbitrarily, that is is?
7. If this rule is adopted the idea that there will be increased competition is ridiculous on its face The rule will not only reduce competition, it will harm the consumer and hand over sales of the fixed indexed annuity to the variable representatives, almost exclusively. That is not competition. . .that is monopoly.
8. I have been told, and it has been demonstrated to me conclusively, that the costs and administration of the fixed indexed annuity product will escalate dramatically and will, therefore, reduce the value for purchasers of the product.
9. Small agencies, such as mine (I am a one-man office and have been for 35 years) will suffer greatly from the impact of this ruling. I am familiar (very) with the Small Business Regulatory Enforcement Act of 1996, and this ruling flies in the face of that Regulation.
10. While the sales volume of this product has been significant, it is primarily due to the fact that the buying public is scared of the market and looking for places to put their money that offers guarantees. What are you going to do with CD's and Indexed life insurance? I feel that the SEC is being imappropriately influenced by the securities dealers through FINRA and are seeking to regain control of the investment market that they have seen disappearing over the last 8 or 9 years. Should this ruling stand, you will see an explosion of sales in the fixed indexed annuities and the brokers will be abandoning their variable products. This is not about protecting consumers. . .it is about placating broker dealers. There are clearly laws in place that protect consumers and State Insurance Deparments who do a great job in making sure that these protections are enforced.

Thank you for allowing me to state my case in regard to this onerous piece of legislation.