October 29, 2008
Proposed rule 151A is ill-conceived. I find the SEC proposal to be confusing and completely unsupported by judicial precedents on what makes anannuityexempt from be a security. Beyond that, it defies common 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 which the investor bears the risk for market losses. Many observers think the SECs proposed regulation—if adopted—is a
slippery slope towards reclassifying many other annuity products as securities. This seems
at odds with the Congressional intent.
Criticisms of FIAs have been exaggerated and market abuses have been largely corrected. The SEC—along with other critics—have focused on abuses in the marketing of these
products. Needless to say, 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. While there have been some inappropriate sales (as with
any innovative product) those concerns have been largely addressed by new regulations and the evolution of FIAs (e.g. lower surrender charges, shorter surrender periods). FIA products and the FIA marketplace will continue to evolve to meet consumer needs despite efforts by critics to paint the entire industry with one brush.