August 27, 2008
As a licensed insurance professional involved in the life insurance and investment arena, I DO NOT support the adoption of proposed Rule 151A, which would classify most indexed annuities as securities.
One of my main concerns is that this proposed rule would ultimately not be limited to indexed annuities and that other insurance products would be brought under the scope of this plan. When I first broke into this business 25 years ago, I was thoroughly trained in the difference between safe money and at-risk money. I chose to specialize in safe money because of my personality and beliefs; however, I do sell mutual funds and variable annuities as part of a diversified portfolio under the strategy of not putting all your eggs in one basket.
When my clients decide to put their money in at-risk products, they do so with the knowledge that there will be fluctuations and risk of loss. To me, that should be the criteria used to determine the difference between savings and investments. Properly structured indexed annuities do not share the same investment risk as mutual funds and individual stocks, since with an indexed annuity the risk of a downturn or loss in the market rests with the issuer of the product and not the client.
I also strongly believe that people who promote unsuitable sales and engage in misleading sales practices have no place in our industry and should be aggressively prosecuted. However, these concerns are not relevant for determining whether or not a financial product is or is not a security, and I urge that this proposal be withdrawn. Indexed annuities should continue to be treated as insurance products. The state insurance regulatory structure is the appropriate means for addressing the concerns raised by the SEC.
For all the above reasons, I urge the SEC to withdraw the proposed rule. Thank you for your consideration.
Jim Bratsakis, CLU, ChFC, LUTCF
Klene and Bratsakis