Subject: File No. S7-14-08
From: Robb Edwards
Affiliation: Managing Principal, AnnuityWorks

August 3, 2008

Rule 151A as described in File s7-15-08 is flawed in many ways:

1. It fails to recognize the required non-forfeiture laws which define annuities as insurance in nearly every state in the union.
2. It fails to recognize that guarantees required by the non-forfeiture laws demand a financial product fundamentally different from the broad securities market.
3. The justifications used for this proposal include policy holder exposure to market volatility and risk. These are improperly characterized without appropriate regard for their significant limitations – limitations that prevent invasion of principal.
4. It would define annuities in very narrow terms, namely that annuities must have a low likelihood of earnings in excess of their guarantees. Such a narrow space for the insurance industry is can neither be positive for the general public nor the financial industries.
5. The rule and the chairman fail to take into account the relatively low number of actual consumer complaints regarding this product.
6. Chairman Coxs introduction of the rule identifies the SECs source of complaints about indexed annuities as NASAA and FINRA. These are not indexed annuity regulators and are the representatives of securities sales people and not the general public. Protecting the interests of one industry by asserting jurisdiction over another industry is not the appropriate use of federal power.
7. The rule fails to honor both the spirit of the Securities Act of 1933 and the tradition that predates the act, exempting insurance from federal, SEC oversight. The stability of this historic act is depended upon by millions of US citizens. To rewrite it has broad negative consequences not contemplated in this file.
8. The rules justifying logic is not shared by knowledgeable industry professionals, notably the American Academy of Actuaries and the National Association of Insurance Commissioners.
9. Both the rule and the chairmans comments fail to isolate the problems unique to indexed annuities. Instead they target features that are common to annuities of all types including traditional fixed annuities. Such confused reasoning belies a misunderstanding of annuity industry structure and its regulation.
10. The use of the ill-founded, incomplete and slanderous Dateline piece was inappropriate for a public office holder.
11. FINRA (formerly NASD) overstepped their authority in issuing Notice to Members 05-50. Although the SEC had as yet made no rule on this point, in 2005 the NASD arrogated to itself authority over indexed annuities. This inappropriate and damaging action is left unchecked by this SEC rule.

I believe this SEC action is motivated by a desire to control as much of the financial services landscape as possible, ultimately including ALL insurance products. Based on regulatory oversight authority currently granted to the SEC, and the current workload in monitoring unscrupulous securities activity, the SEC has enough to do. Leave the regulation of insured, principal protected insurance products to the state departments of insurance.

This proposed rule should be retracted and FINRA should be reprimanded for their arrogation of authority.

With Concern,

Robert Edwards
Managing Principal
AnnuityWorks, LLC