November 13, 2008
Greetings:
I am a member of the FPA and I support the Proposed Rule that would allow for SEC oversight of indexed annuity sales in addition to state oversight by insurance commissioners.
I am a CLU®, ChFC®, EA and CFP®. I have been an independent financial adviser since 1983 -- after spending 4 years as a captive agent of a large insurance company. I hold NASD Series 6, 7, 24 and 63 registrations. In the past I have been an adjuct instructor for both THE AMERICAN COLLEGE and THE COLLEGE FOR FINANCIAL PLANNING.
Importantly, I am also a Licensed Insurance Producer (life, accident & health, fire & casualty) and a Licensed Insurance Adviser (life, accident & health) in the Commonwealth of Massachusetts. My beginnings were in the insurance industry and I speak from experience when I say that the compliance oversight by state insurance commissioners has not compared to the compliance oversight by the SEC. Let's face the facts. Insurance commissioners are not equipped or trained to understand -- much less regulate -- complex securities products such as Equity-Indexed Annuities.
It is very clear that Equity-Indexed Annuities are, in fact securities. FINRA and SEC already agree on that, as far as I can see. As such, they should enjoy the same regulatory oversight as variable annuities -- namely that insurance agents should have to become securities licensed in order to sell these products. Only then can they be appropriately trained in proper and ethical sales practices to distribute these complex, confusing and very expensive products to the right customers.
I am also an arbitration chair and panelist for FINRA. I have personally adjudicated equity-indexed annuity sales abuses since these products were first introduced. The public -- and especially the senior citizen segment -- remain quite vulnerable to sales abuses with EIA's being sold by individuals holding only life insurance licenses. These abuses need to stop as soon as possible. A very fast and effective way to curb these abuses is to raise the licensing bar for those selling them.
In my practice, I recall talking to a prospective client who had purchased an EIA with a 15% back-end sales charge that declined to zero only after the contract was in its 16th year! The individual was never told how brutally expensive it would be if he surrendered the contract before the CDSC ran out. Now that the equity markets are much lower, I shudder to think what has happened to this client's retirement plan.
The Proposed Rule is a reasonable and balanced approach to enhancing state enforcement efforts. As such, I support its passage.
Sincerely,
Dallas W. Coffman, CLU®, ChFC®, EA, CFP®
True Wealth Consultant™
Branch Manager, LPL FINANCIAL
Member FINRA/SIPC