Subject: File No. S7-14-08
From: Timothy M Barth, CLU, ChFC

August 5, 2008

How dare the SEC attempt to smugly take over their rival's number one product line? Do we actually live in a society that allows this type of manipulation in order to control all the marbles? Are we next going to say that only Coke drivers can deliver carbonated drinks to stores or other distributors because a Pepsi driver delivered to much product? That is in essence what the SEC is trying to accomplish here with Fixed Index Annuities.

I currently have my Series 24, 7, 66, and 63 sidelined. I am in my 2nd year of my window until those licenses expire and I cannot pick them up at another broker/dealer. What kind of predicament have you placed me with? If I wait this rule out with all the appeals I foresee, I lose my licenses. If I attempt to go under a broker/dealer today I have only to sell the Equity Index Annuities that are approved by that broker/dealer. It is my opinion that the products that have been approved through most broker/dealers are not the better products on the market to fill the need of clients that want a chance to earn better than expected returns and are comfortable with the guarantees that Fixed Indexed Annuities provide.

I believe Fixed Indexed Annuities are excellent products that give consumers guarantees, flexibility, tax-deferral, and many other advantages. While FIAs are not for everyone, sales of this innovative product have soared in recent years because they give consumers a unique combination of guaranteed protection and opportunity for higher accumulation than traditional fixed annuities.

The SECs draft regulation (Rule 151A) adds an unnecessary layer of securities regulation to this insurance product. Rule 151A would turn most FIA products – as well as more non-indexed traditional fixed annuities -- into securities. This development would subject them to an unnecessary layer of securities regulation. This will have far-reaching consequences by disrupting the manner in which these products are sold today, causing confusion over the differences between insurance versus securities, and ultimately providing little additional consumer protection at tremendous cost to companies, agents, and ultimately consumers.

Proposed Rule 151A is ill-conceived. Many securities lawyers find the SEC proposal to be confusing and completely unsupported by judicial precedents on what constitutes an annuity exempt from securities laws. Beyond that, it defies common sense that a product which has virtually no market-related downside risk should be considered a security in the same manner as mutual funds or variable products where investors truly bear risk for market losses. Many observers think the SECs proposed regulation – if adopted – is a slippery slope towards reclassifying many other annuity products as securities. This seems at odds with Congressional intent.

FIA products are heavily regulated by state insurance departments. The NAIC, state regulators have worked hard, over many years, to come up with appropriate suitability and disclosure requirements for FIA products. To the credit of state insurance regulators, this work continues today and should not be derailed by the SECs unilateral action.

Criticisms of FIAs have been exaggerated and market abuses have been largely corrected. The SEC – along with other critics – has focused on abuses in the marketing of these products. Needless to say, there are abuses in the marketing of all financial products including many that are already regulated by the SEC. The fact is the FIA market has grown rapidly because there is a demand for these products and generally consumers have been pleased with the results. While there have been some inappropriate sales (as with any innovative product) those concerns have been largely addressed by new regulations and evolution of products themselves which today generally have lower surrender charges and shorter surrender periods. FIA products and the FIA marketplace will continue to evolve to meet customer needs despite efforts by critics to paint the entire industry with one brush.

The recent downturn in the stock market highlights the value of FIAs. While millions of Americans suffered financial losses as a result of a twenty percent plunge in the stock market, FIA holders have not lost a penny in retirement savings because of this market turmoil. FIA holders have peace of mind that market fluctuations do not adversely affect their retirement savings.

The SEC proposal has not been appropriately vetted for comment – and appears to be being rushed to adoption. With virtually no forewarning, the SEC unveiled this proposal on June 25th and has allowed for comments only until September 10th. This means a proposal with profound effects on the insurance industry could become law within just a couple months even though agents and insurers have had minimal opportunity to evaluate, comment, and possibly offer alternative approaches to address any valid concerns. This sudden action comes ten years after the SEC first identified this very issue that was then left dormant as the FIA market grew and evolved over many years. Fair play demands that a proposal of this magnitude not be rushed or adopted hastily.

That fact the SEC used a Dateline investigation documentary to show abuses was absolutely pathetic. The Dateline piece was poorly put together and only showed what lengths the banks would go to attack the Insurance Industry. Then for the SEC to chime in with the same data is absolutely mind boggling. Both the SEC and Dateline could do a little more homework if they are going to sling mud.

After reading some of the comments, I do not find many that actually agree to this proposal for any other reason other than correcting the fact that some bad insurance agents have misrepresented or sold to someone inappropriately. The NASD and the SEC both should have had their legs cut out from under them a long time ago if that was the punishment for allowing this type of behavior.

Please take my comments into consideration before making this critical decision. I thank you for allowing me to voice my concerns.