July 25, 2008
-Dear Commissioners:
I urge you to reconsider and revaluate your decision on SEC151a or File No. S7-14-0-8.
The FIA is a fixed product and people purchase the product for many of the same reasons people purchase savings instruments such as CDs or Fixed Annuities. As I grow older and my book of business does the same, my clients and other senior citizens seek a safe haven from the peaks and valleys of the stock market. They don't enjoy the liberty of future "time" horizons to recoup their losses.
Unlike true security products, the purchaser is NOT directly impacted by market fluctuations. Negative investment risk fluctuation to the purchaser is eliminated entirely. That is what attracts conservative investors and seniors citizens to this suitable insurance product.
FIA purchasers assume the benefits and rewards of a Fixed Annuity. Market fluctuations do NOT affect principal value or past interest credits. Peace of Mind is established upon the purchsing of this insurance product by my customers who are afraid to a continued streak of investment losses at this point and time in their lives. If they were 15-30 years younger, their "Risk Management Tolerance" would be/has been totally more aggressive.
Suitability regulations in most states and the sale practices required by insurance companies already meet or exceed the SEC and federal requirements. Complaint resolution through a department of insurance is much more effective than that provided in securities law. Rather than hiring an attorney and going to court, a consumer working with their local department of insurance receives direct representation at no cost. Many seniors dislike dealing with attorneys who take a piece of their retirement savings when involved in a law suit.
The complaint rate on FIAs is one complaint for every $109 million in sales according to the Advantage Compendium. Over the life of any annuity contract, the compensation is actually less than that of an investment advisor. Have you done your homework on this fact?
You are focused only on declaring products a security if the sales volume is significant. You fail to consider Indexed CDs or Indexed Universal Life in this rule. You are being inappropriately influenced by securities dealers through FINRA. These dealers are seeking to gain control of additional sales volume to increase their revenue. This is clearly not about protecting consumers as those protections are already in place with each state department of insurance. Just look into the California Department of Insurance for "insurance".
Thank You,
Walter Schimmel, jr.