Short-term victory - Read below

Updated - December 15, 2009

Last week the SEC filed a supplemental brief agreeing to a two year delay in the effective date of the Rule. The SEC consented to allow the effective date of the Rule to run from the date of the publication of "a retained or reissued Rule 151A" in the Federal Register

The SEC also stated that it has begun the Section 2(b) analysis ordered by the U.S. Court of Appeals in July. The 2(b) analysis will evaluate the impact of the Rule on efficiency, competition, and capital formation.

While this is a favorable development for the industry, we are still faced with a great deal of uncertainty. We are waiting for the Court to rule on the future of the Rule – the Court can do anything from vacating the Rule to allowing the issue to remain with the SEC on remand.But we do know the following:

• The Rule, if implemented, will not go into effect in January of 2011.
• With the two year delay, the earliest the Rule could go into effect is sometime in 2012.
• But despite this advance, the best way to stop SEC Rule 151A is through legislation. Continue to contact your Congressperson or Senator for their support of SEC Rule 151A repeal.

Updated: July 28th, 2009 based on a court ruling on July 21, 2009.

The Court of Appeals for the District of Columbia Circuit today ordered the Securities and Exchange Commission to reconsider a rule that treats most equity index annuities as securities.

The ruling is a victory for the equity index annuity industry and state insurance commissioners.

The SEC’s rule, issued late last year, was challenged by an industry group led by American Equity Investment Life Insurance Company of West Des Moines, Iowa, and the National Association of Insurance Commissioners of Washington.

They argued that the SEC did not have legal authority to declare jurisdiction over annuities, which are regulated by the states as insurance products.

The court found that the SEC’s consideration of the effect of its rule on efficiency, competition and capital formation was “arbitrary and capricious.”

“The SEC purports to have analyzed the effect of the rule on competition, but does not disclose a reasoned basis for its conclusion that [the rule] would increase competition,” the court said in its ruling, which was written by Chief Judge David Sentelle.

The SEC’s reasoning that the new rule would bring legal clarity to the status of equity index annuities “is flawed,” the court said.

“Whatever rule the SEC chose to adopt could equally be said to make the previously unregulated market clearer than it would be without that adoption,” the court said in the ruling.

The SEC’s rule, which was to have taken effect Jan. 12, 2011, was designed to provide greater consumer protections to equity index annuities

Full court ruling:  Click here pdf