Subject: File No. S7-14-08
From: David Gray
Affiliation: Agency Principal

October 14, 2008

The recent economic turmoil and world-wide market downturn illustrate the value and purpose of indexed annuities:

Protection of principal (and credited earnings) Potential for higher yields than equally safe alternatives

IA's have prevented every person who owns one from taking a penny in market
losses (with the money they have in IA's). Can you name any "securities"
owners that didn't take a huge 'bath' in the past few weeks?.

The SEC should spend some serious time examining actual contract statements of indexed annuity owners, from inception to the present. What you'll find is many (if not most) have substantially outperformed the index they're linked to. Since many indexes (SP 500, for example) outperform 3/4's or more of all mutual funds, and IA's are often outperforming the indexes, why would the SEC want to make IA's more difficult for the public to obtain (and that's exactly what will happen if the SEC classifies IA's as "securities")?.......most securities-licensed reps. will offer IA's only as a last resort, because they earn less money selling IA's as opposed to having "assets under management". In addition, most insurance-licensed-only persons (and this is who sells the bulk of IA's) will not go to the trouble to become securities-licensed.

Result is more people will have more money at risk.....when the gov. as a whole has incredibly large un-funded/under-funded liabilities (SS, Medicare/Medicaid), why wouldn't the SEC pursue a policy that encourges more people (instead of less people) to be in a vehicle that helps mitigate the "retirement problem"? In other words, a policy which makes more people less dependent on government programs for their retirement income / health-care needs?

The average individual investor loses money investing in individual stocks.
The SP 500 index outperforms the overwhelming majority of mutual funds.
Since most individual investors invest in mutual funds rather than individual stocks, this means most investors are paying some broker or mutual fund manager to mis-manage their money, because the money-manager can't beat the index...........what a laughable circus Problem is, it's not funny for investors or for their financial futures........meanwhile, the broker/fund-manager still gets his substantial piece of the pie, regardless of his performance..........we wouldn't put up with that in the corporate world, and scream bloody-murder when it does happen.

The SEC's proposed ruling on IA's would mean more money gets mis-managed by more securities-licensed people.....more money will end up in the pocket of Wall St., and less money will end up in the pocket of the public. Sad to say, but there is no logical explanation for this proposed ruling other than that the SEC is bowing to the squeals from Wall St. about loss of market-share to IA's...........since there are far greater complaints about securities products than about IA's (either by number of complaints, or by % of complaints/dollars), it's clear more 'oversight regulation' is needed
on the securities side, not on IA's. Why, when the SEC can't keep its "own
house in order", does it propose to take over regulation of an
industry/product that is in better order? This is equivalent to Congress
raising corporate taxes, and assuming/hoping the public is too stupid to realize the cost will passed on to the public.....extremely naive.

We don't believe the SEC is naive, which makes it clear this is about market-share, not 'protecting the consumer'. Please rule in the best interest of the public, not the investment world.

- David Gray, Agency Principal, SIG