August 26, 2008
Sir:
The above proposal is founded upon misperception it will not help the consumer, it will only add another layer of complexity to the sale of Fixed Indexed Annuities (FIA's).
An FIA is merely a Fixed Annuity with a specific formula for determining my interest rate. It is no more a security than a "regular" fixed annuity or for that matter, a certificate of deposit (CD).
The rule suggests that the consumer bare the majority of investment risk for fluctuating performance whereas in fact these products are designed to PROTECT the consumer from market risk. Where investing in a mutual fund subjects me to the risk of a loss in part or all of the money I invested and any past gains, an FIA PROTECTS me from loss.
The rule wants federally mandated disclosure and sales practices, i.e. the SEC wants to increase the amount of paper going straight to landfill. "Federally mandated disclosure and sales practices" on my mutual funds already accounts for a large proportion of the paper going to my recycle bin now. I don't want more.
The Texas Department of Insurance already requires that all advertising be filed and approved before use: I don't see that adding another layer of taxpayer financed regulation is going to help me or my clients.
I find that the loudest protests against FIA's comes from stock broker types who have lost sales and therefore commissions, not from consumers who have been ripped off.
The rule suggests that sales of these products are driven by outsize commissions. In fact commission on these products varies widely, like the cost of most goods in a free market economy. We don't need a federal regulator to price shop.
The SEC should limit itself to regulating the sale of exchange traded securities and not insurance products.