Subject: File No. S7-14-08
From: Randal J Whittle

September 8, 2008

I applaud your efforts to protect the consumer, but caution you that such efforts ultimately result in less protection for the consumer.

Indexed Annuities are fundamentally an insurance-only contract. The interest credit varies, but is never less than zero. Fundamentally, the ONLY way for an Indexed Annuity to go down in value is for the consumer to reach in and withdraw money out of it. Can this be said of any security product? (No.)

ALL of the clients I have that have purchased these products have done so fundamentally because of the SAFETY it offers them. They couldn't get that from any mutual fund or other security. Unlike many, my client base is in their 40's and 50's (rather than Seniors age 60+)--these people know what they are doing, they are NOT senile, and are risk-averse.

One of the problems in this country is that we have gotten away from the idea of SAVING, and worse yet--have failed to delineate the difference between "Saving" vs. "Investing". Given the state of "Investing" over the last decade, there are many of us out there that have little interest in the stock market, opting instead first and foremost to have guarantees against loss. I and my clients LOVE that an insurance company can do the "investing" for us while we get the peace and safety of knowing they're going to PROTECT us from those losses.

Regulation? The insurance industry is already heavily regulated. With almost continuous scandals taking place on Wall Street, and taxpayer-funded bailouts of risky broker-dealers, I see no evidence that the SEC or FINRA is capable of doing any better job at regulating the Insurance Industry any better than it already is. Consumers have been getting screwed by Wall Street for decades. Dalbar studies have shown while indexes have risen at one rate, the average consumer seems to get far, far less. FINRA seems more interested in collecting fees for their Broker-Dealer Members than they are in protecting the consumer.

To be sure, the Insurance Industry has seen some bad behavior on the part of agents, and there is no excuse for this, but the problems are largely being addressed. The disclosures are clear. And there are plenty of Registered Reps in the securities world that exhibit the same bad behavior--SEC regulation hasn't prevented those Bad Registered Reps.

So why would anyone think an Indexed Annuity qualifies as a security? It guards against loss, so that can't be it. Bad Insurance Agents may misrepresent it? Bad agent behavior does not in itself make the product a security--and there are already improving safeguards in-place to prevent that. The latest SEC argument is the "More likely than not" argument--the idea that if the Indexed Annuity is "More likely than not" to provide a return greater than its guarantees, then it is a security. This argument is a stretch by any standard. I several Whole Life contracts which have exceeded their "guaranteed" amounts significantly--does that make them a security? (No) Why should the potential for GAIN make an instrument into a security? Its a silly argument with no sensible basis at all. Instead, it is (or should be) the potential for LOSS that makes an instrument into a security--and even then, only a Loss that is out of the consumer's control.

If the SEC implements this proposed rule 151A, the result will be greater costs, less choice for the consumer, and worse yet--LESS protection for the consumer. Does anyone actually believe that FINRA is worried about the consumer here? Or are they just trying to protect their Broker-Dealer Membership from losing the fees they collect from assets under management to Insurance Companies that provide a safe, sensible option to consumers wishing to PRESERVE what they have, rather than risk gambling it away just when they may need it most?

I have first-hand seen the utter destruction, due to stock market risk and losses, of the portfolios of many pre-retirees. We continually hear from FINRA that "...In the Long Run, it will all be good...", but just what is the long run? How long does a 55-year old have to wait to recover? For every Go-Go 90's decade with double-digit returns, there are long periods of volatile up-and-down movements that have lasted as long as 15 to 20 years (i.e., 1960's to late 70's). Even for the 90's decade, we saw a large correction that followed, with most people seeing a lost of HALF of their portfolio.

The impact on people's REAL LIVES cannot be underestimated. To get to retirement with a healthy $500,000 and then suddenly be left with only $250,000 after all the carnage...its devastating for this pre- or early-retiree to realize they have to go back to work again--and maybe even never retire because they won't be able to afford to. Had these same people made use of the safety and protection of Indexed Annuities, they would NOT have lost that money--and thankfully, many others I have worked with have done so, and have no such worries.

I personally was previously a registered rep as well with a Series 6. I made a conscious choice to drop that license about 2 years ago because I do not believe risky securities are in the best interests of my clients. I believe it is clear this country was better off when Wall Street was left to the sharks to fight it out, while mainstream America saved (rather than invested) in more sensible, non-risky ways. I have seen fortunes disappear because of Wall Street, or eaten away by the cancer that is "Fees".

For the consumer, the Indexed Annuity as an instrument is NOT the problem. Only about 0.1% of all annuity complaints concern Index Annuities (while a whopping 10 TIMES that figure are complaints about VARIABLE ANNUITIES). The problem, if there is any, is because of a few bad agents. This is already being address by both State Insurance Commissioners and by the Insurance Industry itself. Efforts by the SEC to help here will only confuse the issue further. No consumer has ever lost a dime from market losses in an Indexed Annuity, and this ruling 151A, if allowed to stand, will prevent thousands of risk-averse consumers from hearing about this product. The potential financial impact could be incredible--thousands of jobs, millions in spendable income--all stripped from the economy.

With all the volatility in markets and our economy today, restricting a safe instrument like Indexed Annuities is the very LAST thing we need.

I implore you to strike DOWN rule 151A.

May common sense be your guide.

- Randal Whittle