Subject: File No. S7-14-08
From: Joseph W Sharp
Affiliation: Independent Insurance Agent

July 12, 2008

I STRONGLY oppose the idea of classifying Equity Index Annuities as securities. They are NOT securities. Do securities offer a 100% guarantee on principal? Do securities offer guarantees on interest earned? NO But Equity Index Annuities do this. In fact, Equity Index Annuities are nothing more than plain old fixed annuities other than the crediting method used for determining interest crediting. I agree futures (a security) are used by the insurance companies backing Equity Index Annuities to derive interest credits, but this is NOT under the control or direction of the annuitant. Therefore, whatever the company backing the Equity Index Annuity uses to create gains should not be held against the annuitant as this proposed move would do unfairly.

If there are suitability abuses in the marketing of Equity Index Annuities, the cure is NOT to call them something they are not. The cure is what the industry is doing - policing itself with the use of suitability forms and reviews before contracts are issued. If necessary, punish those who are abusing the system. But calling an Equity Index Annuity a security will not curb any abuses in the sales process. Letting insurance regulators police insurance products is the way to cut down on abuses.

My feeling is that there is one reason only why the securities industry wants the SEC to have jurisdiction over Equity Index Annuities. That is to reduce competition. If Equity Index Annuities were available only through registered representatives, the availability to the public would be reduced. And I think there is a good reason why there are BILLIONS of dollars in these products now: they offer what the public wants ... guarantees not present in securities but with upside potential. What risk is present in an Equity Index Annuity compared to a plain fixed annuity? None But what risk is in any type of security compared to an Equity Index Annuity? Plenty So this is why I do not see the wisdom or advantage to call Equity Index Annuities what they are not and regulate them along with securities - which they are not. Equity Index Annuities are savings vehicles. Securities are investment vehicles. Equity Index Annuities offer guarantees that securities do not. They are NOT the same thing. I personally own securities and Equity Index Annuities because they each have their place and perform differently - and I know the difference.

Finally, classifying Equity Index Annuities as securities would add to the costs of developing and maintaining these contracts due to extra filing fees and other costs that are inherent with securities. Who would pay these fees? Eventually, they would be covered by savers in the form of lower returns. How is that beneficial?

In summation, I am in favor of ethical conduct in my profession and regulation that insures that happening. But calling Equity Index Annuities something they are not which will have the effect of weakening the product, making them less available to the public, and reducing competition is NOT what regulation is intended to be. The reality is that the securities industry would have the ability to suppress the availability of Equity Index Annuities in favor of the securities products they market effectively now. This is not helpful to the public. These are related but different products that can work well together. But I do not believe it is wise to call an insurance product (an Equity Index Annuity) a security because the securities industry seeks an unfair competitive advantage in doing so. If Equity Index Annuities held the risks securities traditionally present, I would agree. But since they do not, leave them under the jurisdiction of insurance regulators.