WASHINGTON — The U.S. Securities and Exchange Commission has proposed a definition of “risk” that is “overbroad,” the National Association of Insurance Commissioners says in a court brief.
The state insurance regulators that the NAIC, Kansas City, Mo., represents “have a congressionally-recognized interest in exclusive regulation of insurance [under the McCarran-Ferguson Act],” as specified under Section 3(a)(8) of the Securities Act of 1933, the NAIC says.
Federal regulation in these spheres by virtue of Rule 151A, which would classify many EIAs as securities and put them under the SEC’s jurisdiction, “constitutes injury per se” to each state insurance regulator, the NAIC says.
The brief was submitted last week, in connection with a federal court suit brought by EIA underwriters and marketers as well as by the NAIC.
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The SEC published Rule 151A, the regulation that sparked the dispute, in January. The rule is set to take effect in January 2012.
The suit, American Equity Investment Life Insurance Company, et al, vs. SEC, No. 09-1021, was filed in the U.S. Court of Appeals for the D.C. Circuit. Oral arguments in the case are scheduled for May 8.
The NAIC’s lawyers contend that in seeking to impose federal regulation on EIAs, the SEC is asking the court to assume that “a product exposing a purchaser to any degree of risk is a security.”