A federal Appeals Court panel should require the Securities and Exchange Commission to start from scratch if it continues to want to regulate equity-indexed annuities as securities, an insurance company says in a new brief.

The brief by lawyers for Old Mutual Insurance Company was submitted to the panel in response to a Nov. 6 order by the panel of the U.S. Court of Appeals for the D.C. Circuit.

The SEC in January had published a rule, 151A, regulating EIAs as securities, but the industry immediately filed suit.

The decision in American Equity Investment Life Insurance Company, et al, v. the Securities and Exchange Commission, No. 09-1021, held that the SEC decision to regulate EIAs as annuities was reasonable but that it did not comply with Sec. 2(b) of the Securities and Exchange Act of 1933, which requires the SEC to study the effect of the rule upon efficiency, competition, and capital formation, and to include that information in its proposed rule.

“Vacatur … would guarantee that the new, proper ? 2(b) analysis the Court is requiring the SEC to conduct, and any possible changes to Rule 151A, would be subject to renewed notice-and-comment rulemaking,” the brief said. “That, in turn, would increase the likelihood that whatever the SEC does next, it will be based on a better administrative record, and hopefully lead to more reasoned-decision making,” the brief explained.

The original Old Mutual filing in early September asked the court to ensure that the insurance industry would have 2 years to prepare for the SEC’s revised rule to reclassify most fixed indexed annuities as securities, if and when a final rule might be approved.

Instead, the panel’s order asked Old Mutual to brief the court on what it should do in the wake of its split July 21 decision in which it said that the agency had authority to oversee EIAs as securities but that it had failed to properly study the effect of the rule.

The court said it “will then consider whether a stay, vacatur, or another remedy is more appropriate than the remand without vacatur provided in the order issued July 21, 2009.”

The SEC has until Dec. 8 to reply, and the court said it would then decide what it should do.

The panel asked Old Mutual in its Nov. 6 order to brief the court on Old Mutual’s view as to whether the panel should vacate the ruling because the agency had not complied so far with the court’s request to study the impact of the rule on efficiency, competition and capital formation.

In response, lawyers for Old Mutual Monday submitted a brief in which it said that vacating the rule was the most appropriate resolution of the case.

It is the most appropriate resolution because “a proper analysis requires the SEC to assess whether it is, on balance, appropriate to enact Rule 151A in light of its speculative benefits as compared to its commercially adverse impact on competition, efficiency and capital formation,” the brief said.

The brief further argued that the SEC’s Sept. 23 response to Old Mutual’s original request for a delay in implementation of the rule so that the industry has 2 years to comply “gives every indication that the SEC has not begun to address the court’s concerns, and is not included to conduct a rigorous analysis.”

In publishing a final rule in January, the SEC said it would go into effect Jan. 12, 2011. But EIAs issued before Jan. 12, 2011, would not be subject to additional legal responsibilities even after the new rule became effective, it added.

The rule also addresses the manner in which a determination will be made about whether amounts payable by the insurance company under a contract are more likely than not to exceed the amounts guaranteed under the contract.

The original court decision was handed down July 21 by a panel that included D.C. Circuit chief Judge David Sentelle, Judge Douglas Ginsburg and Judge Janice Rogers.