The Battle of Rule 151A: The Indexed Annuity Community Takes on the SEC

July 14, 2010 by NU ONLINE NEWS SERVICE

Published 7/13/2010 

The fight over regulation of indexed annuities may be one of the most ferocious National Underwriter Life & Health has covered in recent years.

State and federal securities regulators saw that indexed annuities offered investors the possibility that they could earn a return linked to a stock index, just as a variable annuity might, and asked, “Why shouldn’t the U.S. Securities and Exchange Commission regulate the indexed annuities, just as they regulate variable annuities?”

Indexed annuity producers and issuers shouted back, “Because the products are backed by the insurers’ general accounts and expose holders to no risk of loss of principal due to market fluctuations.”

When the SEC moved in December 2008 to classify indexed annuities as securities, by approving Rule 151A, the producers and issuers quickly went to court to block implementation of the regulation.

Rule opponents also organized a wave of lobbying efforts, including several fly-ins that put enthusiastic, well-prepped sales professionals face to face with members of Congress and the congressional staffers who handle financial services issues.

As of July 2010, opponents have succeeded at getting a federal appeals court to vacate the rule on procedural grounds, and they have gotten Sen. Tom Harkin, D-Iowa, to add an amendment to H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act bill conference report, that would classify most indexed annuities as state-regulated insurance products, rather than as securities.

Here is a Rule 151A resource guide, to help provide some background information on this controversy.

Primary Sources

The Rule

The States and Indexed Annuities

• New York Regulators Issue EIA Guidance
• Mass. Fines Broker Dealer $500,000 Over EIA Sales
• Iowa To Evaluate EIA Regulations
• States Tackle EIA Oversight

A Rule is Born

• SEC Takes Issue With VA and EIA Sales Materials
• EIA Roundtable Hears Wide Variety Of Perspectives
• Glauber Calls EIA Disclosure Daunting
• Organizers Name Annuity Roundtable Panelists
• NASD Official Calls For Annuity Regulation Summit
• Let’s Talk

The Court Case

• Appeals Court Vacates Rule 151A
• VA Company Asks Court to Toss 151A
• SEC Offers To Delay 151A Implementation
• Insurer Wants SEC To Start Over On 151A
• Lawyer Interprets 151A Ruling
• Court May Toss 151A Order
• No Clarity On Indexed Life From Appeals Court
• After Courts Nod On 151A, Views Differ On What SEC Will Do
• Top story: Experts foresee changes to fixed indexed annuities after court ruling on 151A
• Blogger: Rule 151A Is Dead
• Boros Reacts To 151A Ruling
• Court Tosses SEC Rule On Procedural Grounds
• EIA Oral Arguments Begin
• MetLife Backs SEC Oversight Of Indexed Annuities
• More on the challenge of Rule 151A
• Case Against SEC’s Rule 151A Now In Hands Of The Court
• How The Industry And NAIC Will Make Their Case Against The SEC
• Insurers Sue To Block SEC Rule

The H.R. 4173 Battle

• Sigh of Relief for EIA Sellers
• EIAs To Remain State Regulated
• H.R. 4173: Senate Conferees Back Indexed Annuity Proposal
• H.R. 4173: Harkin Moves Ball On Annuities
• Indexed Annuity Provision Back In Play
• Financial Reform Casts Shadow On Industry
• S. 3217: Harkin Indexed Annuity Amendment Hits Wall
• S. 3217: Senate Votes 60-40 To Pass Cloture Motion
• Harkin, Other Dems Back Indexed Annuity Amendment, And Other S. 3217 News

The Meeks-Price Bill

• Indexed Annuity Bill Lands In Congress
• NAFA: Rule 151A Bill Is Coming

Lobbying: In General

• Industry Continues Rule 151A Fight
• Despite SEC’s Two-Year Concession, Industry Determined To Fight 151A
• NAFA: We’ll Keep Up The Indexed Annuity Battle
• NAILBA Speaker: Help Us Face Threats
• InsurMark Battles Rule 151A
• Do What It Takes To Get Heard On Financial Reform

Lobbying: The Fly-In

• FIA Fly-In: Participants May Have Signed 15 New Cosponsors
• FIA Fly-In: More Than 150 Offices Visited
• Insurer Reps Voice Support for H.R. 2733 At FIA Fly-In
• Follow The Fly-In Live Via Twitter
• Tweet-In With Us For The Fly-In
• FIA Fly-In: Producer Hopes To Spread Awareness
• Rule 151A Fly-In Organizers: There Is Still Time To Join Us
• NAFA Fly-In To Promote Annuity Bill To Senators

Indexed Annuities – the Products

• Annuities Face Uncertain Future If Rule 151A Goes Through
• Products This Year May Come With A Hint Of Innovation
• 10 Product Woes To Laugh About Later
• It Was A Year Of Dichotomies In The Index Annuity Market
• It’s Showtime For SPIAs
• The Convergence Of Deferred Annuity Benefits
• Editorial comment: Digest this
• Top story: Competing for fixed annuities based on fame, commission or rate
• American Equity Exec Optimistic About Annuity Market
• Challenges Ahead For Index Annuities And Structured Products
• The Index Annuity Hits Its Teens
• Allianz Rolls Out EIA
• Old Mutual Rolls Out 3 EIAs
• Standard Enters EIA Market
• Genworth Offers Simple EIA Contract
• Jackson National Expands EIA Family

Indexed Annuities – Distribution

• Rule 151A’s impact on producers
• Why Some Annuity IMOs Own Their Own Broker-Dealer
• EIA Volume Drops
• Analysts: EIA Commissions Will Continue To Fall

The SEC

• The SEC And Innovation In Annuities: What Is Needed

FINRA

• FINRA Chair Comes To NAVA

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Originally Posted at National Underwriter on July 13, 2010 by NU ONLINE NEWS SERVICE.