Subject: File No. S7-14-08
From: Jeffrey Duncan

November 3, 2008

Fixed Indexed Annuities (FIAs) are excellent products that give consumer guarantees,
flexibility, tax-deferral and many other advantages. While FIAs are not for everyone, sales
of these innovative products have soared in recent years because they give consumers a
unique combination of guaranteed protection and opportunity for higher accumulation
than traditional fixed annuities.
The SECs draft regulation (rule 151A) adds an unnecessary layer of securities regulation
to this insurance product. Rule 151A would turn most FIA products—as well as some
non-indexed fixed annuities—into securities. This will have far-reaching consequences by
disrupting the manner in which these products are sold today. Thus, causing confusion
over the differences between insurance versus securities and providing little additional
consumer protection at tremendous cost to companies, agents and ultimately clients.
Proposed rule 151A is ill-conceived. Many securities lawyers find the SEC proposal to
be confusing and completely unsupported by judicial precedents on what makes an
annuityexempt from securities laws. 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.
FIA products are heavily regulated by state insurance departments. Through the NAIC,
state regulators have worked hard over many years to come up with appropriate suitability
and disclosure requirements for FIA products. To the credit of state insurance regulators,
this work continues today and should not be derailed by the SECs unilateral action.
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.

The recent downturn in the stock market highlights the value of FIAs. While millions of
Americans suffered financial losses as a result of a twenty percent plunge in the stock
market, FIA-holders have not lost a penny in retirement savings because of market turmoil.
FIA-holders have peace of mind that market fluctuations do not adversely affect their
account values.