On Tuesday the U.S. Court of Appeals for the Washington D.C. Circuit ordered the Securities and Exchange Commission to reconsider Rule 151A, which deems annuities linked to equity indexes to be securities subject to registration with the SEC.
The three-judge federal appeals panel held that the SEC “failed to properly consider the effect of the rule upon efficiency, competition and capital formation.”
“We hold that the Commission’s consideration of the effect of Rule 151A on efficiency, competition, and capital formation was arbitrary and capricious,” Chief Judge David Sentelle writes in an opinion for the court. “The SEC purports to have analyzed the effect of the rule on competition, but does not disclose a reasoned basis for its conclusion that Rule 151A would increase competition.”
The National Association for Fixed Annuities released a statement Tuesday saying the association “is very pleased that the Rule was found flawed and remanded to the SEC. By the same token, NAFA is disappointed that the Court did not find that indexed annuities are exempt under section 3(a)(8) of the Securities Act. This is why the NAFA sought a legislative repeal of Rule 151A and supports the House sponsored bill (H.R. 2733) and Senate sponsored bill (S. 1389) which are critical to ensure that fixed indexed annuities are not subject to duplicative, bureaucratic, and potentially inefficient oversight by the SEC.”
NAFA and the Coalition for Indexed Products are sponsoring a “Fly-In for FIAs” on July 29 “to keep this important legislation in front of Congress and its staff. The association says that “setting up a meeting with either a staff member or your representative will be instrumental to secure support and sponsorship by key Congressional leaders for this legislation and ensure that the SEC will not be able to assert jurisdiction over FIAs in the future.”