Subject: File No. S7-14-08
From: Michelle S Morar

September 5, 2008

I would like to know why would a product that is guaranteed have to be regulated by a body that regulates products that have market risk? Fixed annuities are excellent products that give consumers guarantees, flexibility, tax-deferral, and a unique combination of guaranteed protection with an opportunity for higher accumulation than traditional fixed annuities. The SEC's draft regulation (Rule 151A) adds an unnecessary layer of securities regulation to this insurance product. Rule 151A would turn most FIA products into securities. This will have far-reaching consequences by disrupting the manner in which these products are sold. It will provide little additional consumer protection at tremendous cost to companies, agents, and ultimately consumers. Proposed Rule 151A is ill-conceived. Many securities lawyers find the SEC proposal to be confusing and completely unsupported by judicial precedents on what constitutes an "annuity" exempt from securities laws. It does not make sense that a product which has virtually no market-related downside risk should be considered a security in the same manner as mutual funds or variable products where investors truly bear risk for market losses. FIA products are already heavily regulated by state insurance departments. Criticisms of FIAs have been exaggerated and market abuses have been largely corrected. There are abuses in the marketing of all financial products including many that are already regulated by the SEC. The fact is the FIA market has grown rapidly because there is a demand for these products and generally consumers have been pleased with the results. The recent downturn in the stock market highlights the value of FIAs. While many suffered huge losses in the stock market, FIA holders have not lost a penny in retirement savings because of this market turmoil. The SEC proposal has not been appropriately vetted for comment- and appears to be being rushed to adoption. With virtually no forewarning, the SEC unveiled this proposal on June 25th and has allowed for comments only until September 10th. This means a proposal with profound effects on the insurance industry could become law within just a couple of months even though agents and insurers have had very little time to evaluate, comment, and possibly offer alternative solutions. Fair play demands that a proposal of this magnitude not be rushed or adopted hastily.