Subject: File No. S7-14-08
From: Thomas L Barnett
Affiliation: CEO, Affordable Benefits Company

July 26, 2008

The purposed Sec.151a is an unnecessary ruling that amounts to commission grabbing that will greatly disadvantage the general public.
The SEC has stated that people buy fixed annuity products for the same reasons they buy Mutual Funds, Variable Annuities and Brokerage Accounts.
The fact is consumers purchase FIA's because they are FIXED. They don't want the risk other products place them in. This is the same reason they put money into Savings Accounts and CD's, and not a security.
The SEC has falsely stated that FIA purchasers bear the risk just like most performers in a fluctuating market. The fact is the purchaser is not affected by market fluctuations. Negative market performance is eliminated entirely in these products, which is why the consumer likes them in this volatile climate.
The SEC has stated that the purchaser assumes many of the risks like that of an investor. The fact is FIA purchasers assume the BENEFITS of a fixed annuity. Market fluctuations have no effect on the principle or past interest crediting of a FIA product.
The SEC declares the need for "Federal Mandates" of sales procedures and disclosures are needed to regulate FIA sales.
The truth is that suitability regulations and sales practices already meet and surpass that of Federal Regulations through State Department of Insurance offices and complaint resolutions by DOI's, then by any SEC law.
Under SEC laws the client must retain an attorney for representation and go to court. Thus, putting many clients at risk because cost factors prohibit them from retaining legal representation. (Thus eliminating many complaints that could be filed, but are immediately exhausted due to funds they lost in the first place). Through State DOI's clients are given representation at no cost and actually allows any investor a voice regardless of economic circumstances.
The SEC has said that abusive sales practices are fueled by out sized commissions. The truth is that complaint factors during the life of an annuity are 1 in every $109 million in sales according to the Advantage Compendium. This is much less that that of current advisers selling securities during the same period of time.
The SEC mentions case law regarding whether an annuity is a security, but they fail to mention the Judges finding in this case. In Malone vs. Addison Insurance Marketing it clearly states that "an Indexed Annuity is not a security".
The SEC feels that competition will increase by accepting rule 151a. How could competition increase when the consumer would now need to open a brokerage account to access a fixed product? Any consumer, at any level of income, may now get a fixed annuity without the added costs of opening a brokerage account. Making them more accessible to the average American. By adding the costs and fees of opening a brokerage account this will flat out reduce not only competition, but limit accessibility to the average consumer.
If the above happens the cost of creation and administration of the product will increase dramatically and thus reduced the value of the product to the consumer both presently and in the future.
This will also create a negative economic effect to the small agencies in the industry who produced $100 million or less annually. This attack on small businesses in this economy will have a very negative effect over all, not to mention that it completely violates the Small Business Regulatory Enforcement Fairness Act of 1996.
When the facts are simply studied it is easy to see why the SEC wants control of FIA products. They only want to declare a product a "Security" if the sales volume is significant. They haven't included "Indexed CD's" or "Indexed Universal or Whole Life" products in this rule. Where is the overriding concern for protection on all "Indexed" products, if they are such a threat to the consumer and so abusive by the agents who sell them? What it looks like is an huge influence is coming from the Securities Dealers Trade Association known as FINRA. They want control of FIA's to increase their revenue stream, which has nothing to do with the protection of the consumer since there are plenty of protections in place through suitability and State and Local DOI's.
Please look through this smoke screen and sham of a law that does nothing but hurt the consumer, limit the average persons ability to save in a secure environment, and unjustly limit the ability of the small business owner in America to offer safe investment vehicles to the public under sound and regulated controls already in place. We don't need more government interference and regulations by a greedy regulatory group that feels they're missing funds they want their hands on at a risk and detriment to the public. Aren't there enough problems within their own industry that need attention without adding more to the pot that they can't handle?