Subject: File No. S7-14-08
From: Thomas R Grainger

October 21, 2008

Comments about pending SEC Rule 151A

I am strongly opposed to the proposed rule SEC 151A. Fixed indexed Annuities (FIA) are not securities under the letter or the intent of the law. Several times in the past the SEC and FINRA have tried to regulate FIA sales. Previous decisions have made it clear that these are not securities under the definition of the law. They are no market risk products with the built in protection of principal that is the characteristic of a traditional insurance product.

Americans deserve the right to be able to buy these products. The traditional Broker Dealer network market place does not like these products. They do not want to sell them even when they are the most suitable product for a particular clients need and wishes. Why? It is simple, there is no effective long term revenue stream for the BD Network with these products. These products have only a reasonable one time commission not a combination of a commission to purchase, a commission to sell and an ongoing fee for the BD Network. When held to maturity the Variable products almost always have much higher total fees and commissions than the FIA products.

Fixed Indexed Annuities are products purchased by the risk adverse. Securities include market risk. Even money markets include some amount of market risk. If you dont believe it, just look at the recent money market funds breaking the buck news reports. Savers deserve a sound financial vehicle like the FIA products offered to their clients almost exclusively by Licensed Insurance professionals. Although I dont have the actual statistics I will bet that over 90% of all FIA products are sold by Licensed insurance agents that are not dual licensed in securities and insurance. This alone justifies keeping the product licensed and regulated as is.

Your right to regulate variable annuities is not in question because of the sub accounts that are directly invested in securities or indexes. The Variable products do have some significant amount of market risk built into their design. The Fixed indexed products do not have that direct investment in securities or index funds. No one saving their money in a Fixed Indexed Annuity has lost their money to market risk. How I wish the SEC could make that same claim about the Risk based products that they sell to savers or investors.

If there is a problem with FIA products there is already a regulatory process in place to deal with it. The State Insurance Commissioners (NAIC) do an admirable job of addressing regulatory or deceptive practices related to the sale of FIA products or other insurance products for that matter. Therefore there is no need for a regulatory change of Fixed Indexed annuities. Sales reps who practice deceptive techniques in the sale of these products are being punished without the interference or any role of the SEC. The insurance carriers are voluntarily strengthening their Suitability regulations on the sale of these products without the intrusion on the part of the SEC. That is a good thing

We know what this is really about FINRA wants to be able to regulate these products because it is a threat to their revenue stream. They loose revenue every time a client makes a valid decision to shelter money from risk in a Market Risk Free product like an FIA.

If the SEC what to regulate some market segment full of abuse you don't have to look very far. The SEC regulates the products sold that have caused the Economic meltdown of the world economy. Where is the evidence of effective SEC oversight in this Critical area? It is totally absent What has the SEC done to prevent this abuse? I have seen nothing in the popular media or the financial press about positive SEC actions in our current economic meltdown What steps are being implemented to prevent a recurrence of this problem in the future? Nothing comes to Mind On all of these more critical issues the SEC has been silent and ineffective. I have read nothing about SEC action addressing this problem that dwarfs any potential limited individual agents abuse of the FIA Market. I don't hear any one talking about the need for a $700 Billion dollar bailout of the Fixed Indexed Annuity marketplace. Responsible levels of financial reserves are required by the state insurance commissioners. Even the AIG mess was not caused by Annuities, it wasn't caused by their Consumer Insurance products because they are regulated by the state insurance commissioners. Insurance products companies are held to higher financial standards than SEC regulated companies or products. The problem with AIG was on the Financial Services side of their business. This is where the real abuse is The way AIG will pay off the federal funds in their bailout will come from the sale of sound assets which quite possibly will include some of their solvent insurance assets.

PLEASE, don't try and tell me that the SEC is needed in the FIA marketplace They are not needed here This marketplace is working just fine without SEC interference Your tremendous resources would be much more effectively utilized if you cleaned up your own dirty backyard. Leave the fixed Indexed Annuity marketplace alone. Clean up the area you are legally responsible for. Let the State Insurance regulators do their jobs. If they find individual abuse they will continue to punish and implement any necessary corrective actions without your unwanted intrusion SEC and FINRA Stop wasting taxpayer money on this financially motivated and totally unnecessary RULE 151A

Best Regards,

Thomas G