I have reviewed the proposed rules referenced above, and have the following comments:
I am opposed to the proposed rule. The solution to the abuses is like taking a sledgehammer to push a pin into cork. The current rules in place are sufficient to curb abuses if properly enforced.
Note: All specific comments below reference a specific section of the proposed rule.
Comment on 2821(a) (1): The rule should not apply to employer sponsored qualified plan participants. The decision as to funding vehicle for plan participants rests with the Employer or Trustee of the plan, and is the responsibility of the Employer/Trustee, who is also the fiduciary, to explain the funding vehicle to plan participants.
Comment on 2821(b) (1): Requiring documentation for (b) (1)(A),(B) and (C) without creating a standard imposes an undue burden on principals required to supervise this activity, and will create differing standards for the public. Further, many of the requirements outlined in (A) and (C) are redundant and covered under other NASD rules. Singling out deferred variable annuities for signed documentation of facts and circumstances already required places an undue burden on the principals required to supervise this activity. There should be coordination between the prospectus, any “point of sale” requirements, and/or “plain English” disclosure requirements. Further, design of deferred variable annuities has progressed beyond the rules as set forth. While short term trading is not recommended between deferred variable annuities or other investments, contracts with no surrender charges and low or flat fees may be appropriate for investors with short time horizons who also want short term tax deferral. Further, there is no clear guideline on what is meant by “intended” use of a deferred variable annuity. These are primarily investment products, and as such solving the client’s investment objective may be the only intended use, and the investment objective is already part of the suitability/appropriate process.
Comment on 2821(c) (1): Requiring a 2 business day principal review is unduly burdensome and will create a hardship for small OSJ offices. This will create additional expenses and costs which could jeopardize many small businesses. This requirement does not appear to be designed to protect the public, as all deferred variable annuity contracts have free look provisions, typically 10 days, such that transactions can be unwound with little if any harm to the public.
Thank you for taking the time to consider my comments.
Edward C. Hiers, President