By Arthur D. Postal, National Underwriter Health & Life
WASHINGTON — A federal appeals court on Monday July 12, has sided with agents and others who want the Securities and Exchange Commission (SEC) to classify indexed annuities as insurance products rather than as securities.
A 3-judge panel at the D.C. Circuit Court of Appeals has granted the plaintiffs’ request for a rehearing in American Equity vs. SEC because the panel agrees with the plaintiffs’ view that the SEC “failed properly to consider the effect of the rule upon efficiency, competition, and capital formation.”
“The SEC argues it is likely to reissue Rule 151A but it also acknowledges it is in the midst of analyzing the effect of the rule upon the law of each state,” the panel says. “As the petitioners point out, the commission cannot know whether that analysis will support reissuing Rule 151A until it has been completed.”
The panel included justices David Sentelle, Douglas Ginsburg and Judith Rogers.
The decision to grant the request for a rehearing revises a decision the same panel issued in July 2009. They said then that the SEC’s efforts to analyze the effects of Rule 151A on securities market efficiency, competition and capital formation were “lacking.”
The SEC has been trying to split jurisdiction over indexed annuities with state insurance regulators. SEC officials have argued that indexed annuities act like securities and ought to be regulated the same way securities are; SEC critics have asserted that the products are backed by insurers’ general account investments and expose holders to no risk of principal loss due to investment market fluctuations.