October 29, 2008
I am writing to voice my strong opposition to proposal 151a. As a financial representative recognized as a top producer in both the securities and insurance industries, I believe the classification of Fixed Index Annuities as a security will have detrimental and far-reaching effects.
First of all, the speed at which the SEC has rushed this proposal does not leave enough time for conscientious financial professionals to make an intelligent response. Second, this would add another layer of regulation to a product that is already highly regulated. It is my contention that this is yet another example of how regulation hurts the general public. Ironically, we are at a time in which there is high volatility in the market and a large percentage of people are nearing or entering retirement. FIA's, when placed for suitable funds, provides a level of safety that many retirees need. Classifying them as a security and therefore exposing them to restrictions most B/D's now impose severely restricts the opportunity for appropriate individuals to obtain the safety these products provide. This is the result of the SEC enumerates as abuses in the marketing of these products. Those abuses have been largely corrected through suitability requirements in the insurance industry. I find it ironic, if not hypocritical, that the SEC wants restrictions on the sale of these products as a "broad-brush" approach at the very time that they require that we "know our client".
Lastly, the very nature of FIA's illustrates that they are not a security. While returns are based on an index, it is with a guarantee of principal. They are NOT market based, they are index based - there's a big difference. They provide features that are very clearly annuity features and should be considered an annuity.
It seems to me that the SEC could better spend their time keeping their own industry clean rather than attacking another. They have been far from perfect in doing so and have so over-regulated the industry that hordes of the best representatives are simply dropping their licenses. There are millions of people over-invested in securities as a result of accumulating assets in their 401K's and don't understand the risks they're taking. As they are enlightened by knowledgable insurance professionals, they are putting appropriate and suitable funds into products, like FIA's, that provide much greater safety and guarantees. It appears to me the SEC is doing nothing more than trying to get their hands on assets that are leaving their industry daily. Just because they don't like the direction of the flow of funds out of their industry doesn't mean the general public should be damaged by over-regulation and confusion this represents.
Thank you.
Steve Gordon
248.269.7877