I am a licensed insurance professional and variable product salesperson. I am writing to you concerning the suitability standard and principal review requirements pertaining to the sale of variable annuities contained in NASD proposed Rule 2821. Although the latest NASD proposal includes several amendments made to earlier versions of the proposal, the proposed rule's requirements are redundant, unnecessary, will provide no meaningful additional protection to consumers and will not only adversely impact my business, but will ultimately be a disservice to consumers. I strongly urge the SEC to disapprove the proposal.
I firmly believe people who engage in misleading sales practices should be aggressively prosecuted and subject to appropriate sanctions. The NASD, however, has failed to adequately justify the need for the proposed rule. On the contrary, the available data does not support the NASD's claims that the level of sales problems in the variable annuity marketplace calls for the adoption of the proposed rule. Unsuitable variable annuity sales made up less than .50 percent of the NASD's disciplinary actions over the last five years, and complaints about mutual funds and individual securities far outnumber those concerning variable annuities. Furthermore, the vast majority of the comments received by the NASD and SEC regarding the proposal opposed the new rule, and the NASD has not adequately responded to the concerns raised by the vast majority of commentators.
The newly-proposed Rule 2821 duplicates existing supervision and suitability requirements. NASD rules (including Rule 2310) already contain suitability requirements that apply to all sales of securities, including variable annuities. If regulators really want to protect consumers, appropriate enforcement of the existing suitability rule would better address that need.
In addition, the requirement for review by a principal found in the newly-proposed rule deviates in several significant ways from the general supervision requirements found in Rule 3010. This requirement appears to present a bias against these products, and will lead to constant second guessing of my advice and recommendations (based upon less first hand information regarding my client's specific objectives and needs than has been made available to me as the client's advisor).
The NASD proposal, in my opinion, will ultimately harm consumers by making these products less available to people who could benefit from them. For these reasons, I urge the SEC to disapprove NASD proposed Rule 2821. Thank you for your consideration of my views on this matter.