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Regulation and Compliance > Federal Regulation > SEC

SEC Proposes Rule on EIAs, Opens Rule 15a-6 for Comments

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The Securities and Exchange Commission issued a proposed rule June 25 that would establish the standards for determining which equity indexed annuities are not considered annuity contracts under the Securities Act of 1933 and therefore are securities subject to the investor protections afforded by the securities laws. The SEC also decided the same day to open for comments and revisions rule 15a-6, which governs both how overseas investment professionals may approach potential U.S. clients and how those parties conduct business.

Under the proposed rule concerning equity-indexed annuities, Section 3(a)(8) of the Securities Act provides an exemption under the Securities Act for certain insurance and annuity contracts, according to the SEC. In releasing the proposed rule, the SEC said it “would provide that an indexed annuity is not an ‘annuity contract’ under this insurance exemption if the amounts payable by the insurer under the contract are more likely than not to exceed the amounts guaranteed under the contract.”

The SEC further states that the proposed rule would address “the manner in which a determination would be made regarding whether amounts payable by the insurance company under a contract are more likely than not to exceed the amounts guaranteed under the contract.” The Commission said the proposed rule “is principles-based, providing that a determination made by the insurer at or prior to issuance of a contract would be conclusive if, among other things, both the insurer’s methodology and the insurer’s economic, actuarial, and other assumptions are reasonable.” The proposed new definition would apply only to indexed annuities issued on or after the effective date of a final rule, if adopted, the SEC said.

Ira Hammerman, senior managing director and general counsel of SIFMA, said in a prepared statement that by opening rule 15a-6 to comments and revisions, “the SEC recognizes that our industry operates in a truly global, interconnected environment.” He said that “by opening up this two-decade old rule for reform, the Commission helps ensure that U.S. markets remain competitive, instead of shackled by arcane and duplicative regulations written before the advent of e-mail or the Internet. Modernizing how overseas brokers interact with U.S. investors is a tangible step forward in the movement to make the U.S. more competitive in the global marketplace.”


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