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Regulation and Compliance > Federal Regulation > SEC

The Battle of Rule 151A: The Indexed Annuity Community Takes on the SEC

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The fight over regulation of indexed annuities may be one of the most ferocious National Underwriter Life & Health has covered in recent years.

State and federal securities regulators saw that indexed annuities offered investors the possibility that they could earn a return linked to a stock index, just as a variable annuity might, and asked, “Why shouldn’t the U.S. Securities and Exchange Commission regulate the indexed annuities, just as they regulate variable annuities?”

Indexed annuity producers and issuers shouted back, “Because the products are backed by the insurers’ general accounts and expose holders to no risk of loss of principal due to market fluctuations.”

When the SEC moved in December 2008 to classify indexed annuities as securities, by approving Rule 151A, the producers and issuers quickly went to court to block implementation of the regulation.

Rule opponents also organized a wave of lobbying efforts, including several fly-ins that put enthusiastic, well-prepped sales professionals face to face with members of Congress and the congressional staffers who handle financial services issues.

As of July 2010, opponents have succeeded at getting a federal appeals court to vacate the rule on procedural grounds, and they have gotten Sen. Tom Harkin, D-Iowa, to add an amendment to H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act bill conference report, that would classify most indexed annuities as state-regulated insurance products, rather than as securities.

Here is a Rule 151A resource guide, to help provide some background information on this controversy.

Primary Sources

The Rule

The States and Indexed Annuities

A Rule is Born

The Court Case

The H.R. 4173 Battle

The Meeks-Price Bill

Lobbying: In General

Lobbying: The Fly-In

Indexed Annuities – the Products

Indexed Annuities – Distribution





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