July 22, 2008
Proposed SEC Regulation of Fixed Indexed Annuities: Fixed Indexed Annuities are not securities and should not be regulated as such. There are a number of reasons they should not be regulated as securities, however, the definition of a security involves the trade off of risk for reward. There is no investment risk associate with the fixed indexed annuity and therefore can not be regulated as a security. There is no risk of loss.
State insurance departments approved fixed index annuities for sale as insurance contracts and not securities. If the SEC deems it necessary to regulate fixed indexed annuities, then any interest bearing type contract (life insurance contracts or annuities) that utilize portfolio rate crediting methods could also meet the definition of a security in that the insurance companies buy a contract(bond)on an underlying security and promise to pay the client a specified return.
The SEC proposed regulation does not stand up to logic. It appears obvious that the only governing body supporting this proposal is the securities regulatory body and the broker-dealer community that stand to benefit financially from the proposed regulations.
I adamantly oppose this proposed regulation and would welcome debate from anyone supporting the proposed regulation.
Keith Smith
smithk@centurytel.net