July 17, 2008
I have been in the securities industry since 1976, and I am a member of the California Bar. Our firm is a FINRA broker-dealer, an SEC investment advisor and a California insurance agency.
After reading your Release, I am still unconvinced that this product should be considered to be a security under federal and state securities laws, and regulated as such. The products that I have seen, appear to have little or no downside risk to principal, with a defined upside potential from year to year. The people that I know that have actually bought this product, including my 80+ year old father, want no down-side risk of loss. Yes, the commissions are high and yes, I'm sure there have been abuses with product sales. But regulating the product as a security doesn't really solve the problem. As you are well aware, the securities regulators still deal with sales practice problems with variable annuities (e.g., see FINRA Rule 2821). I have absolutely no problem with better disclosure documents, or better-informed professionals who are licensed to sell this product, but making it a security is not the answer. Thank you for listening.