Rule 151A is going away, and the insurance industry is celebrating.
Old Mutual U.S. Life was among those who hailed Monday’s decision by the U.S. Court of Appeals for the D.C. Circuit to vacate Securities and Exchange Commission Rule 151A.
Old Mutual U.S. Life, one of the petitioners in a high-profile lawsuit challenging Rule 151A, brought the request for rehearing that led to the court decision to vacate the rule. Eric Marhoun, senior vice president and general counsel, lauded the court’s decision, saying, “we are very pleased by the court’s action because it wipes the slate clean and clarifies that Rule 151A is null and void.”
Rule 151A is the SEC’s controversial regulation that seeks to reclassify fixed indexed annuities as securities and place them under SEC jurisdiction. The rule was challenged in court last year by several companies, including Old Mutual, and the National Association of Insurance Commissioners.
The court handed down its initial decision last July which upheld the SEC’s authority to classify fixed indexed annuities as securities but sent the rule back to the SEC for reconsideration because of procedural flaws in the adoption process. Old Mutual filed a rehearing petition asking the court to stay the rule two years after any new rule was reissued. But the Court went further and threw out the rule entirely.
“This was a nice bonus,” said Old Mutual’s outside counsel Phil Bartz of McKenna, Long & Aldridge, who filed the petition on behalf of Old Mutual. “We felt the court needed to do something to protect the agents and companies writing FIA products and so we conservatively asked for a two-year implementation period. But the court saw fit to vacate the rule which means the SEC must completely start over, and they can now rethink this rule and perhaps simply drop it – particularly given recent action in the Congressional Conference Committee with respect to the Financial Regulatory Reform Bill.”
Rule 151A has been met by vehement industry opposition since being introduced by former SEC Chair Christopher Cox in the waning days of the last administration. In addition to the lawsuit challenging the rule, House and Senate Conference Committees recently adopted legislation that would reverse Rule 151A. The measure has passed the House as part of the Financial Regulatory Reform Bill and action is pending in the Senate.
“This was a big victory both for agents and for consumers who have come to rely on the guarantees provided by FIAs,” said Marhoun, “but we plan to stay vigilant until we’re sure the threat has passed.”
AnnuitySpecs.com President and CEO Sheryl Moore, another staunch 151A opponent, sent out a release thanking everyone involved for their hard work in fighting 151A. “I appreciate all of the grassroots efforts, the lobbying, the regulatory and legislative work, as well as every other form of SKIN IN THE GAME! You are all to be commended and I am proud to be on your team!” Moore said.
“I also want to send out a special ‘thank you’ to the companies that pursued the SEC in litigation,” Moore continued. “I am proud to work with every insurance company offering indexed insurance products, but these companies have helped to ensure that the products I feel so passionate about will continue to be offered as they are today. THANK YOU!“
Read National Underwriter’s article on 151A being vacated by clicking here: http://www.lifeandhealthinsurancenews.com/News/2010/7/Pages/Appeals-Court-Vacates-Rule-151A.aspx