Subject: File No. SR-NASD-2004-183
From: Teresa L Luiz

July 20, 2006

RE: Comment Letter re: Proposed Rule 2821

In response to Amendment No. 2 of proposed Rule 2821 (SEC release SR-2004-183), GWFS Equities, Inc. respectively submits the following comments:

It is unclear why a new NASD rule governing the suitability of recommendations for purchase of a variable annuity contract is needed. Alternatively, it is our opinion that NASD Conduct Rule 2310 (Recommendations to Customer Suitability) should be amended with any supplemental requirements that the NASD believes are necessary to protect purchasers of variable annuity contracts. However, we strongly believe that such amendments must make clear that they only apply to the sale of variable annuities that are directly purchased by an individual contract owner (e.g., non-qualified variable annuity or IRA contract). By contrast, the decision to purchase a group annuity contract offered in a tax-qualified, employer-sponsored retirement or benefit plan that is either defined as a qualified plan under Section 3(a)(12)(C) of the Exchange Act or meets the requirements of Internal Revenue Code Sections 403(b) or 457(b), versus other investment fund product types has already been made by the employer. Therefore, we strongly believe that such qualified, institutional plans as defined above should be exempt from any amendments to the existing NASD Suitability Conduct Rule or to the proposed Rule 2821, should it be approved by the SEC.

As Amendment No. 2 is currently written, proposed Rule 2821(a)(1) would apply in the event that the firm or an associated person of the firm makes recommendations to individual plan participants regarding a deferred variable annuity offered through tax-qualified, employer-sponsored retirement or benefit plans that are either defined as a qualified plan under Section 3(a)(12)(C) of the Exchange Act or meet the requirements of Internal Revenue Code Sections 403(b) or 457(b). Where recommendations are made to an individual plan participant in such plans, we believe that a reasonable effort to determine suitability of the individuals investment allocation in the plan, in consideration of factors such as investment experience, risk tolerance, liquidity, and investment time horizon, as well as other information used or considered to be reasonable by such member in making recommendations to the customer, should continue to be required per provisions of existing conduct NASD Conduct Rule 2310. However, Sect. 2821(b)(2) would also require the member to make reasonable efforts to obtain, at a minimum certain information which is not always applicable to an evaluation of suitability of an individual participants enrollment in their employers qualified retirement plan. (e.g., existing investment and insurance holdings).

It should also be noted that qualified group retirement plan sponsors as defined above have historically instructed service providers conducting enrollment and communication services not to require individual participants to disclose personal financial information such as annual income, tax status, net worth, or investment holdings in relation to their enrollment in the employer's group retirement plan.

Qualified institutional plans, as defined above, commonly elect investment options to be offered in the plan which are a combination of mutual funds, collective trust funds, separately managed institutional accounts, and/or options offered through a group variable annuity contract. The suitability of a plan participant's allocation among investment options offered through their employer's retirement plan is not based on the product type of the investment option(s) selected. Rather, where a registered representative may provide counseling to an individual participant regarding the available investment options selected by the employer, suitability evaluation would moreso be determined based on the partcipant's investment experience, risk tolerance, and time horizon until intended distribution at or following retirement. Disclosure of investment objectives risks, fees and operating expenses for all investment option is made available so that participants can make an informed decision regarding investment allocation.

However, where such plans offer a combination of products such as described above, there are no contract level charges, mortality and expense fees or CDSC fees associated with group variable annuity investment options that apply. Therefore, we believe that the offering of investment options wrapped in a group variable annuity contract in qualified institutional plans, as described herein, where the employer has selected group variable annuity investment options to be available in the plan's fund array, does not present any additional risk to investors requiring supplemental suitability or supervisory regulations, as the NASD views with sales of variable annuity contracts to individual investors.

Thank you for your consideration.

Respectfully,

Beverly A. Byrne
Chief Compliance Officer
GWFS Equities, Inc.