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Rule 151A in the Hands of the Courts


courthouseThe U.S. Securities and Exchange Commission’s Rule 151A might be thrown out by the U.S. Court of Appeals for the D.C. Circuit, according to “Court May Toss 151A Order” by Arthur D. Postal of National Underwriter.  The SEC’s proposed rule would classify indexed annuities as securities, allowing the SEC to apply the same rules that they do with variable annuities and other securities starting in January of 2011.  Last January, insurers filed a lawsuit against the SEC in an attempt to stop Rule 151A from being implemented.

In July an appeals court ruled that while the SEC does have the authority to apply the securities rule to indexed annuities, they “had failed to properly show the effect of Rule 151A on efficiency, competition, and capital formation.”  The appeals court said that the rule needed to be reconsidered.  Old Mutual Financial Life Insurance Company filed a motion of their own requesting that insurers have at least 2 years to comply with Rule 151A if it does take effect.  Instead, the court decided to require additional briefing from both Old Mutual and the SEC and said that they will address the issue of completely vacating the rule altogether.  It looks like the court battles will wage on for indexed immediate annuities and other EIA’s to determine whether they will be classified as securities in the future.

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