SEC Offers To Delay 151A Implementation

WASHINGTON BUREAU — The U.S. Securities and Exchange Commission now plans to provide a full 2-year implementation period for federal regulation of equity-indexed annuities under Rule 151A.

The implementation period would begin after a final rule was issued, the SEC says in a court brief filed with the U.S. Court of Appeals for the D.C. Circuit.

The SEC also has agreed through its court brief to open a Section 2(a) comment period on the SEC’s Section 2(b) analysis of the likely effects of Rule 151A. Section 2(b) of the federal Securities and Exchange Act of 1933 requires the SEC to include an analysis of possible effects on efficiency, capital formation and competition when it releases a draft of a proposed rule.

Remanding Rule 151A back to the SEC without vacating it “is the most equitable and appropriate remedy in this case,” the SEC says in the brief.

The SEC’s move to offer a 2-year implementation period is “a positive development,” according to Eric Marhoun, Old Mutual’s chief legal counsel.

The SEC “seems to recognize that a minimum of 2 years is necessary to implement any rule should they choose to proceed,” Marhoun says.

But “we are hopeful that the court will vacate the rule ultimately based on the petition, which is the question before the court,” Marhoun says.

Old Mutual also hopes the SEC will conclude that the rule is not justified, Marhoun says.

Frederick Bellamy, a Washington, lawyer who has helped represent insurers in Rule 151A proceedings, says the SEC decision to open the Section 2(a) comment period could make it harder for opponents of federal regulation of indexed annuities to challenge the Section 2(b) analysis for Rule 151A.