Subject: File No. 4-606
From: Gary P Klein, ChFC
Affiliation: President of Regal Wealth Group

August 16, 2010

I would like to make three points:

1. Suitability Standard vs. Fiduciary standard. I have worked under both of them and maintain the fiduciary standard is much better for the clients. Look at the history of Broker-Dealers and their relationship to their clients. The public has been severly abused by the wirehouses and broker-dealers over the years. It is about time the public receives more protection.

2. Commisssions. I am an RIA now so I don't receive commissions, but I have a strong suggestion to make in this area. I think all front end commissions on mutual funds and annuities should be the same, along with the relevant breakpoints. The reason so many variable annuities are sold is because there are no breakpoints, so the selling representative gets paid much more. That is why they are so often misleadingly sold. Does anyone in your agency or FINRA monitor the radio shows on "financial planning"? I am astounded at the sales pitches on these shows. It is borderline criminal. Also, if a representative receives a level trail on annuities or mutual funds of 1% (which is common today), they should be able to show proof in their files of ongoing contact and investment advice with the client. Too many of these products are sold and the client is left to deal with the insurance company or mutual fund company. Typically the client doesn't realize he is paying these fees because it is not disclosed in a regular manner.

3. Equity Indexed annuities. I don't know how anyone can argue that these are not securities. These are sold by insurance agents that are usually telling the public that the securities they are holding are too risky, so they convince the public to replace their existing securities with a "guaranteed" product. The client seldom understands what they are buying. More often than not they think they will get the return of the stock market without any risk. I find most agents don't understand the products they are selling. How can an insurance company offer the same indexed annuity with different commission levels, and therefore different surrender schedules? Why do insurance commissioners allow this to happen. I see products that pay up to a 10% commission with up to 12 years surrender charge that doesn't even disappear at death.

4. Banks. Is anyone paying attention to what happens to the public at their banks? You cannot go into a bank or credit union these days to open a large Certificate of Deposit without being pressured to buy an annuity. The sales practices are once again very deceitful.

These are the reasons we need a tougher fiduciary standard. Anyone who "sells" or "offers" product to the public should be held to a very high standard of conduct.
The suitability standard has not served the public well in the past, and won't in the future. FINRA has not served the public interest well over all these years. That is why it would be a terrible mistake to place RIA's under FINRA's supervision.