November 13, 2008

Subject: File No. S7-14-08

I am a member of the Financial Planning Association and I support the proposed rule. I have 15 years experience as a financial advisor and insurance agent. I do not speak for my firm so I will leave out my company name. I do not sell equity-indexed annuities.

I worked with four clients who bought equity-indexed annuities from four different companies before they met me. In all cases, they were promised "stock market returns without stock market risk." During a period when the stock market returned about 10%, they earned only 3 to 4%. When I looked at the formula for returns, it was obvious that it was virtually impossible for these contracts ever to give "stock market returns." The illustrations were carefully designed to show conditions that would give double-digit returns. In one case, I used the index returns from 1950 to 2007 to calculate that the annuity would not have earned as much as 10% in the any year in the entire period.

Income tax deferral was another selling point. In three of these cases, the clients were elderly, did not pay any income tax, and needed liquidity more than anything else. In one case, a 74-year old client, who had not earned enough to file a tax return in six years, bought an annuity with an 18-year surrender charge.

These products need more effective regulation. Since agents sell them as securities, they should be regulated as securities. Clients do not understand the difference between insurance and securities. Clients see all of this as "investments." There should be one set of regulations that covers all investments. This proposal is one necessary step in that direction.

Dennis C Gero