With just over a year until the SEC’s controversial 151A ruling is set to go into law, legislators and activists have moved their anti-151A lobbying efforts into high gear. In the fifth installment of our ongoing coverage of the 151A issue, we take a look at the latest moves in the fight, and some experts’ projections for developments in 2010.
While this year’s cavalcade of financial failures and stunning regulatory blunders (the Madoff scam, for instance) have given the SEC some more pressing issues to deal with, is the looming 151A change still a steadfast reality for our industry?
SEC Ruling 151A, which would re-designate fixed indexed annuities as securities and require a substantial retooling of the sales, marketing and distribution of FIA products, is still set to go into effect on January 12, 2011. Since the first discussion on the proposed ruling emerged in the summer of 2008 and framework legislation was launched a year ago, the issue has become a key rallying point for both those who make their living creating and selling the products, as well as state legislators who see it as further evidence of a turf war for control of the insurance industry.
This summer, the U.S. Court of Appeals in Washington, D.C. provided some credence to members of an anti-151A lawsuit by calling the initial ruling “flawed” and “arbitrary and capricious,” handing the proposed regulation back to the SEC for a remand.
Since then, several key state insurance commissioners have maintained constant, interactive contact with the SEC and its still relatively new Obama Administration-era chairman, Mary Schapiro, and say that they’ve been pleased by the extent of public discourse and discussion on 151A – a regulation created and pushed forward, as many have noted, in the waning last hours of the Bush presidency.
Sean Dilweg, Wisconsin’s Commissioner of Insurance, says he and other vocal state-level reps (including Iowa’s Susan Voss) in the NAIC have been working closely with Schapiro’s staff. He says he’s seen considerable effort on the SEC’s part to get more contributions on the issue from external partners.
“She’s set up a system to reach out to interested groups for more input,” Dilweg says. “But it’s an unusual issue to deal with. The insurance industry really doesn’t have a unified approach to the issue, with sellers of different products taking different sides, so it’s hard to get a unified approach.”
Instead, Dilweg says that he and the NAIC are hoping that the organization’s draft suitability supervision and training model, which would place more responsibility for suitable sales on companies and the financial advisors who sell them, might help negate the entire need for the 151A legislation. A pilot program is underway in Iowa; Dilweg says the objective is to continue to maintain the autonomy of the state level oversight of financial products. “We want to demonstrate to the SEC that they do not need to wade into the issue any further.”
A lesson in civics
151A has also served as an important civics lesson for a number of people directly involved in the FIA business, who say their ongoing, hands-on efforts to blitz their senators and congressmen has opened their eyes to the way that Washington works.
Last month, members of the Coalition for Indexed Products (a grassroots organization composed of marketing organizations, insurance companies and individual producers) continued its anti-151A push with a “National Call-In Day,” bombarding federal representatives with a further cavalcade of appeals to quash the legislation. Congressmen and senators are being asked to sign their support for Meeks/Price House Bill 2733 and Senate Bill 1389, both of which call for overturning 151A and have picked up significant support over the year.