A federal appeals court has voided Rule 151A, a regulation that would have treated indexed annuities as securities, placing them under the U.S. Securities and Exchange Commission.
The U.S. Court of Appeals for the District of Columbia Circuit vacated its July 2009 ruling and ordered a rehearing in the case against the U.S. Securities and Exchange Commission. The evolution of Rule 151A has been watched closely by insurance agents and financial service professionals, fearful of the rule’s effect on their ability to sell indexed annuities.
The court’s ruling reversed its prior ruling, issued in July 2009, which said the SEC’s analysis of the effects of the rule on “efficiency, competition and capital formation” were “lacking.” It ordered the government agency to look more closely at the effects.
Rule 151A, issued in January 2009 and scheduled for implementation Jan. 12, 2011, classifies indexed annuities as securities, thus putting them under the SEC’s control. The financial instruments, backed by insurer’s investment portfolios, have been considered insurance products, in large part because investors could not lose principal, meaning state insurance regulators police them.
Insurance companies sued, seeking to halt the rule’s implementation.
The three-judge panel’s ruling may not matter much. Congress is working to overhaul financial service regulation with new legislation, some of which covers the same areas as the rule.
The court in its latest ruling said the SEC “cannot justify the adoption of a particular rule based solely on the assertion that the existence of a rule provides greater clarity to an arena that remained unclear in the absence of any rule.”
Federal appeals court strikes down Rule 151A via IFAwebnews.com .
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