November 15, 2008
Dear Commissioners,
My name is Todd C. Ganos. I am a financial planner by profession. I have been in the investment industry for over 16 years and I have previously been licensed as an insurance agent. I am a lawyer by education and hold a Doctor of Business Administration degree.
I support the adoption of the proposed rule. I could relate horror stories about annuity sales, but I won’t. Whether the Commission should regulate equity indexed annuities should not be based on an emotional response to stories of people being harmed by unscrupulous annuity salespersons. As the saying goes, bad facts make bad law. Whether the Commission should regulate equity indexed annuities is a question of law. That question of law is this: is it the intent of Congress that the Commission SHOULD regulate annuities that are linked to securities? I believe the answer is clearly yes.
Consider an equity indexed annuity that is tied to the Standard and Poor’s Composite 500 Stock Index. While a fixed annuity carries with it the guarantee of the issuer, the equity indexed annuity carries with it the guarantee of the market. As you well know, the market comes with no guarantee. A person who invests in an equity indexed annuity linked to the S&P 500 is exposed to the same risks as a person who invests in the Vanguard 500 Index Fund. By law, the Vanguard Funds is obliged to provide the investor with a prospectus that discloses the risks associated with investing in the S&P 500.
When the Congress established the Commission’s mandate in the 1930s, they could not have foreseen the breadth and complexity of financial instruments that we have today. But, that mandate is still very timely: provide adequate and reasonable protections for investors in securities. Please do not succumb to the double-speak that states “while these annuities have all the risks of a security, they ‘technically’ aren’t securities.” The investing public is exposed to the risks and deserves the protections.
Thank you for your time,
Todd C. Ganos, JD, DBA, CFP®
Principal
Doolittle & Ganos Investment Counsel, LLC