Letters

Blameless firms shouldn’t have to pay for Madoff

Re: the article “B-Ds reel from higher SIPC fees,” which appeared in the Aug. 10 issue, I too am outraged because my broker-dealer will most likely pass its costs on to me, the little guy.

This is as much a crime as the Bernard Madoff case.

I didn’t do anything wrong, nor did my broker-dealer, yet we pay for the failure of the regulatory bodies to regulate. Where were they?

The Financial Industry Regulatory Authority Inc. and the Securities and Exchange Commission should be going after the assets of all involved, and the Securities Investor Protection Corp. should be paying the claims only from these assets. The SEC failed to govern and shut down these scams years ago.

The federal government should be paying this and going after those connected to the scam and those in charge of running these agencies throughout.

No one did their job, and should be accountable.

Go out and collect all their assets. It is outrageous to let the regulatory bodies go unscathed.

Mr. Madoff and his cronies shouldn’t be jailed but should help collect the assets. I am outraged and appalled by this corruption at my expense.

Wall Street and the regulatory bodies have become a joke. Our system has become a joke, and we have become the financial secondary power and laughingstock of the world.

This is a continuation of the savings and loan, Enron Corp. and dot-com debacles. People don’t even trust their certificates of deposit anymore.

We have created and become one big greedy mess of a country, with not much hope in sight.

Dennis F. Judge

Principal

Judge Financial Group

Gibbsboro, N.J.

CFP Board, FPA, NAPFA can’t handle B-D oversight

I read the article “Finra sticks to its guns in flap about oversight of B-Ds dishing advice,” which ap-peared in the Aug. 24 issue.

OK, the Financial Industry Regulatory Authority Inc. may have to decide such activity, but it doesn’t have the background to do so (nor does the Securities and Exchange Commission).

So can we look to the collaboration of the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors to take care of such activity and the fiduciary responsibility?

No, we can’t.

The problem is that they have actively supported illegal activity for close to 20 years, and there is no interruption.

I find it disingenuous for so many news sources to focus on a fiduciary duty when the lies should be so obvious.

Errold F. Moody Jr.

Principal

EF Moody Jr.

San Leandro, Calif.

NAFA clarifies position on NAIC suitability model

The National Association for Fixed Annuities would like to clarify its position on the National Association of Insurance Commissioners’ Suitability in Annuity Transactions Model Regulation, reported in the article “Advisers at peace with NAIC proposal for more annuity rules,” which appeared in the Aug. 24 issue.

The article stated: “Insurers complained about the extra responsibility and liability for watching all annuity sales and monitoring distributors. Milwaukee-based NAFA balked at the idea of applying a Finra-based suitability model to the sale of fixed-insurance products. Furthermore, obtaining clients’ investment information would be outside the daily business activities for insurance producers who work only in such products, said NAFA’s executive director, Kim O’Brien.”

In addition to misstating our position, readers were misled by the omission of critical information.

NAFA doesn’t balk at the idea of applying Finra-based suitability to the sale of fixed-insurance products.

Rather, we believe the following:

• The existing regulatory framework for annuity suitability protection is working and doesn’t need a wholesale replacement. Satisfaction in fixed-indexed-annuity sales is overwhelmingly high, with no complaints filed on 99.96% of all policies sold between 2006 and 2009.

• The current NAIC suitability model, which assures that annuities are sold according to suitability standards, could be enhanced to provide insurers uniform guidance in developing agent training, supervision and monitoring standards.

• More than 40 states have adopted the existing NAIC suitability model, and most carriers apply the requirements to all states where they do business. The time and effort that is required to produce and implement a new model law would be better spent strengthening the existing model and promoting adoption of the current model in the remaining states.

In addition to outside business practices, NAFA stated: “If the insurance producer is not securities-licensed, straight application of [Financial Industry Regulatory Authority Inc.] Rule 2821 would require the agent obtain investment-related answers to questions he/she is not licensed to ask.” This is a much more substantive objection than the shortened version provided in the article.

NAFA objects to a blanket adoption of Rule 2821 for insurance regulation without reasonable changes to accommodate the insurance elements of the sale.

NAFA member companies al-ready require producers to review suitability information that follows most of Rule 2821’s list and have incorporated the list into their suitability forms, but with one major change: They have adapted the list to include relevant and enlightening insurance adaptation.

NAFA member companies have spent many human and financial resources to train producers not to use the term “investment” when discussing a fixed annuity, because fixed annuities are insurance products that provide guarantees to consumers and the investment community, and regulators have appropriated the term for exclusive use to describe risky products (securities). To use the term “investment” muddies the significant differences between securities and insurance, and will likely create misunderstandings and/or incorrect expectations by consumers.

Specifically, NAFA thinks that asking the consumer’s investment time horizon, investment objectives and investment experience doesn’t provide the appropriate information in the suitability review when discussing a fixed annuity. Instead, a suitability review for a fixed annuity should include financial objectives to uncover things such as the consumers’ objectives for retirement income, asset protection or charities.

A question of financial experience might uncover their experience with budgeting money for emergency expenditures, loss of job, investments, insurance protection, savings, etc. Conversely, a question of investment objective might uncover only the need to obtain a 7% annual growth rate in their mutual fund.

Investment objectives and experience would be limited to securities, while the term “financial” requests a much broader perspective of the customer’s situation, needs and experience, or at least one which includes guaranteed products.

NAFA applauds InvestmentNews‘ efforts to keep readers abreast of industry news and information. We also appreciate the opportunity to contribute to those efforts.

Thank you for allowing NAFA to provide this expanded and accurate information to your readers.

Kim O’Brien

Executive director

National Association for Fixed Annuities

Milwaukee

AdvisorCheck’s approach ‘weak form of extortion’?

So explain to me why AdvisorCheck Inc.’s approach with advisers isn’t a weak form of extortion or even slander (“Consumer website that offers background checks irks advisers,” InvestmentNews, Aug. 17).

I have to pay a company for a background check so I won’t be slurred by the inference that I have something to hide?

Would AdvisorCheck have kept anyone from investing with Bern-ard Madoff?

If not, I bet he would have paid.

Kent M. Grealish

Principal

Quacera Capital Management LLC

San Bruno, Calif.

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