Subject: File No. S7-14-08
From: Karl G Vandenberg

September 4, 2008

Dear Chairman Cox,

My livelihood and business as a licensed, independent insurance agent may be greatly impacted by the proposed rule 151A. As you know, 151A focuses on fixed index annuities, which are fixed annuities already regulated by the state department of insurance. In my opinion, the securities regulation will add little benefit to consumer protection.
Many states have already adopted the NAIC Annuity Disclosure Model Regulation and most, if not all, of the major index annuity carriers have mandated the use of a disclosure statement or certificate describing all important terms and conditions of the annuity contract, including prominent disclosure of surrender charges. Many, if not all, major indexed annuity carriers conduct suitability reviews of all sales in all states. Suitability reviews required of brokers under FINRA rules would not add any meaningful protections over and above what is already being done.
The guarantees provided by a fixed indexed annuity offer consumers significant protection against investment risk. The Dow Jones Industrial Average has suffered a decline this year in excess of 20% from its October 2007 record, yet a fixed indexed annuity purchaser will not lose any principal due to such negative market performance, unlike a consumer of an equity security or a stock mutual fund, or a variable annuity.
The overall average annual market return since records have been kept is approximately 10% whereas the average annual market investor return is approximately 3% due mainly to investors pulling their investments out of the market during major declines such as this year. With fixed indexed annuities the human emotional element of investing is removed because the policy value stays allocated to the index choices for the entire policy anniversary year. Over longer periods of time and even with many major market corrections, it is proven that investors are rewarded for staying invested during declining markets however during major market declines many investors will temporarily move their more aggressive investments to safer securities such as bonds until after the market recovers. This can be devastating to their overall return because of missing just a few of the best market recovery days. With fixed indexed annuities this is less likely to occur because the policy owner can change allocations only once per year during the policy anniversary period. Additionally, any interest earned in an indexed annuity from year to year cannot be lost due to declining stock market indexes. In my opinion and for these reasons I feel a fixed indexed annuity IS NOT A SECURITY and should not be regulated by the SEC.
My 23 year old son is considering entering the life insurance/annuity business. For him and many other beginning intermediaries, having the ability to first provide safe guaranteed annuity products to their prospects with potential interest linked to the performance of the stock market without the risk of loss of a declining stock market is a great opportunity for a newly licensed intermediary to learn the importance of a core holding for any of their clients savings or investment program. I believe fixed indexed annuities serve very well for such a holding and can be the foundation of any well allocated retirement savings and investment program. It would be ashamed to have redundant rules in place that would require new intermediaries to obtain their securities license over and above their insurance license before being able to provide these very fine products to their potential clientele. This would make entering this business additionally expensive and time consuming before a newly licensed intermediary could begin meeting with prospects for the potential to start earning a respectable income. In addition, this new rule would also require those intermediaries who currently provide fixed indexed annuities to their clientele and who do not have a current securities license to obtain such a license which would add an additional cost, time commitment and most likely an unusable complicated additional required knowledge base to their practice that could lead to potential unnecessary errors and confusion.
I am asking you to extend the comment period beyond 9/10/08 and that you oppose this unnecessary rule.
Thank you.
Sincerely,
Karl G. Vandenberg
Karl Vandenberg Financial Services, LLC
1508 E. Lincoln Avenue
Little Chute, WI 54140
Phone: 920-788-5253 FAX: 920-687-0734
E-mail: karlvanprincipal@netscape.net
Securities offered through H. Beck, Inc., FINRA, and SIPC
H. Beck, Inc. and Karl Vandenberg Financial Services, LLC are not affiliated.