ACLI Objects To SEC Market Timing Proposal

Life insurers are concerned that a regulation proposed by the Securities and Exchange Commission to curb abusive market timing will put variable annuities at a disadvantage to mutual funds because the proposed rule fits two-tier structures poorly.

There are more appropriate alternatives to curbing market timing than the proposed regulation, says the American Council of Life Insurers in a comment letter.

The proposal by the SEC is for an amendment to a final regulation already published by the SEC to deal with market-ting abuse, such as so-called “sticky asset” arrangements with hedge funds that prompted consumer, regulatory and congressional indignation.

The rule shares some similarities with two bills considered by Congress to deal with the problem.

Adding to the financial services industry’s concern about the issue, the changes the SEC is drafting now may have to be in place by Oct. 16, the date the SEC has established for compliance with the entire rule, according to Carl Wilkerson, ACLI vice president and chief counsel, securities and litigation.

Alternative market timing solutions for two-tier structures, such as fair value pricing or limitations on excessive transactions, “operate successfully and more equitably for variable contracts and pension plans,” and should be substituted for a market timing rule for these instruments, the letter said.