VA Company Asks Court to Toss 151A
February 8, 2010 by Arthur D. Postal
Published 2/5/2010
WASHINGTON—An issuer of equity-indexed annuities advised an appeals court to vacate a regulation that the Securities and Exchange Commission wants to use to oversee equity-indexed annuities as securities.
In a court brief filed late Tuesday, Old Mutual Financial Network, Baltimore, Md., was responding to a request for comment from a panel of the U.S. Court of Appeals for the D.C. Circuit.
A commitment by the SEC to a 2-year delay of a rule regulating EIAs as securities “is the minimum relief” a federal appeals court panel should accept in dealing with the issue, the brief said.
The SEC December filing recognized the major, substantive undertakings that the SEC must complete before the SEC can determine if Rule 151A is justifiable, the Old Mutual brief noted.
Remanding the rule to the SEC while it conducts its study “would leave the rule in legal limbo,” which would “continue to suggest to the EIA annuities industry that the rule likely will be readopted,” Old Mutual said in its brief.
To avoid continuing competitive disorder and injury to the EIA industry, “the court should vacate this defective rule, which the SEC now acknowledges would take a major effort to resurrect,” according to the brief, filed in American Equity Investment Life Insurance Company et al, v. the Securities and Exchange Commission, No. 09-1021.
The brief dealt with a court challenge to the rule by the EIA industry of the SEC’s publication in January 2009 of a rule regulating EIAs as securities.
In a July 21, 2009 decision, the panel held that the SEC decision to regulate was reasonable but that it did not comply with Section 2(b) of the Securities and Exchange Act of 1933, which requires the SEC to study the effect of the rule upon efficiency, competition, and capital formation, and to include that information in its proposed rule.
In September, Old Mutual asked the court to consider delaying execution of the rule because of the need for the Sec. 2b analysis.
In response, the SEC said it has started work on its Sec. 2b analysis and committed itself to a full 2-year implementation period for federal regulation of equity-indexed annuities under Rule 151A, which would begin after it issues a final rule.
