August 27, 2008
Florence Harmon
Acting Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0609
Florence Harmon:
As a licensed insurance professional, I am writing to you to urge you to withdraw proposed rule 151A, which would classify most indexed annuities as securities. In addition, I am concerned that the application of proposed Rule 151A would not be limited to indexed annuities and that other annuity and insurance products that happen to fit the criteria set out in the rule would be brought within the scope of the rule.
While I firmly believe that people who promote or engage in unsuitable sales and/or misleading sales practices should be aggressively prosecuted and subject to meaningful sanctions, concerns about suitability, disclosure and marketing methods, however valid, are not the relevant criteria for determining whether a financial product is or is not a security.
Properly structured indexed annuities do not share the same investment risk as investment products such as mutual funds and individual stocks, since with an indexed annuity the risk of a downturn in the related index rests with the issuer of the product and not the consumer.
Of additional concern to me is that consumers ,ay suffer if the rule is adopted, not only in terms of available professionals to serve their needs in the event the adoption requires the professional to have a securities license, but also from the resulting increased costs for marketing the annuities which would inevitably result and, also inevitably, be passed on to consumers.
In my opinion indexed annuities should continue to be treated as insurance products, and the state insurance regulatory structure is the appropriate means for addressing the concerns raised by the SEC. The professional organization I belong to, the National Association of Insurance and Financial Advisors, is committed to working with the NAIC and state insurance commissioners towards the goal of having every state adopt and vigorously enforce the NAIC's model regulations on annuity suitability and disclosure. I also support NAIFA's recommendation that a state regulatory body be designated to develop standards for indexed annuity product design so that inappropriate indexed annuity products would be prevented from reaching the marketplace.
For these reasons, I urge the SEC to withdraw the proposed rule. Thank you for your consideration of my views on this matter.
Sincerely,
Robert Vandy