After two years of debate, political action and some serious soul-searching on behalf of advisors across the country, the controversial SEC 151A ruling was given the one-two punch in separate moves in the nation’s capital.
On July 12, a federal appeals court announced that it had opted to side with plaintiffs who had launched a lawsuit questioning the validity of 151A and vacate the ruling entirely. 151A would have required federal oversight of the sale of fixed index annuities (also known as equity indexed annuities) and threatened to considerably transform the business of agents, FMOs and carriers nationwide.
The three-judge panel at the D.C. Circuit Court of Appeals, hearing the case of American Equity vs SEC, dumped the SEC’s current attempts to regulate the product, although the panel fully admitted that the SEC could attempt to re-float similar legislation in a new form.
“We grant the petitions insofar as they assert the SEC failed properly to consider the effect
of the rule upon efficiency, competition and capital formation,” the panel wrote.”We therefore order that Rule 151A be vacated.” The second and final nail in the coffin, 151A foes hope, is the final Senate adoption of the Wall Street Reform and Consumer Protection Act, which includes an amendment to permanently designate FIAs as state-regulated products.
The 151A regulation could be undone as part the amendment floated by Democratic Senator Tom Harkin of Iowa, chairman of the Senate Committee on Health, Education, Labor and Pensions, provided that state insurance departments unanimously pass and adhere to NAIC standards on the sale of FIAs. Ten states have yet to do so.
The larger financial reform act, H.R. 4173, was endorsed by House and Senate committees in late June but was held up for final vote in the Senate and approval by President Obama. The death of a key supporter, Democratic Senator Robert Byrd, also helped delay adoption; at magazine press time in mid-July, the Senate vote was still looming.