The U.S. Securities and Exchange Commission is facing a court challenge to its effort to regulate equity indexed annuities as securities.
The Coalition for Indexed Products, a group representing indexed annuity issuers and distributors, today filed a suit concerning the SEC’s new Rule 151 in the U.S. Court of Appeals for the District of Columbia Circuit.
In related news, the SEC today published the final rule in the Federal Register.
Unless court action reverses the SEC decision, Rule 151 will take effect Jan. 12, 2011.
The Coalition for Indexed Products alleges in the suit that the SEC exceeded its authority under the Securities Act of 1933 by attempting to regulate EIAs as securities.
The coalition also alleges that the agency has violated the federal Administrative Procedures Act by ignoring insurance industry claims that regulating EIAs as securities might cost insurance companies $100 million in the first year alone, and by declining to give “comprehensive consideration” to whether existing state regulation was sufficient to protect consumers.
The SEC indexed annuity action “directly contradicts” a federal court ruling that fixed indexed annuities are annuities, not securities, the coalition contends.
The U.S. Court of Appeals for the District of Columbia Circuit typically hears cases about new agency regulations.