US Court of Appeals Vacates 151A
July 14, 2010 by P.E. Kelley
Industry response is positive, cautious
by P.E. Kelley, L&HA Managing Editor
In a decision lauded by professionals across the financial services industry, the US Court of Appeals, District of Columbia, vacated SEC Rule 151a, the Securities and Exchange Commission’s (SEC) controversial regulation which sought to classify equity-indexed annuities (EIA) as securities. The brief decision from the court ( http://pacer.cadc.uscourts.gov/common/opinions/201007/09-1021-1254621.pdf ) was met with cautious optimism from all parties involved.
Following are comments from some of those parties:
• “…we are very pleased by the court’s action because it wipes the slate clean and clarifies that Rule 151A is null and void. This was a big victory both for agents and for consumers who have come to rely on the guarantees provided by FIAs
– Eric Marhoun, senior vice president and general counsel, Old Mutual US Life
• Allianz Life has maintained that fixed index annuities are insurance products and not securities. We applaud the Court’s decision. We believe that the revised NAIC Model Suitability Act is a move in the right direction in providing consistency and an added layer of protection for consumers’ income needs in retirement
– Tom Burns, Chief Distribution Officer, Allianz Life
• Is the securities status of indexed annuities settled for good? No. Remember- the Securities and Exchange Commission first questioned the securities status of indexed annuities in 1997. They did so again in June of 2008 with their proposed rule 151A. If we want to ensure that indexed annuities will be regulated as fixed insurance product indefinitely, we need to continue our current legislative strategy.
– Sheryl Moore, President & CEO, Advantage Group Associates, Inc.
• The court’s decision is certainly a great victory for the industry. But, depending on how it’s drafted, a fiduciary standard is potentially a greater problem that could have a negative impact on the sale of all annuities.
–Judith Alexander, Director of Sales & Marketing, Beacon Research
• Maybe now the SEC can use that energy to focus on regulating the securities industry. A job that in the recent past has at times appeared to be more than what the SEC can already handle.
– Mike Janky, President, Forward Strategies Insurance Brokerage, LLC
• Congratulations to every agent, every home office staff member and every marketing organization principal that contacted their Senators and Congressmen and made the case for continued state insurance regulation of fixed indexed annuities. Those efforts, the march on Washington and the fly-in have all had a positive effect on the outcome.
And special thanks to the insurance carriers who stood up against a rule that they knew was wrong and would adversely affect consumers.
We know the battle is not fully won, and we await a successful vote on legislation that should fully settle the issue.
– Bruce Dickes, Vice President, Chief Marketing Officer, Financial Brokerage
• This action wipes the slate clean and clarifies that Rule 151A is null and void. Now the SEC must completely start over. This was a huge victory for agents and consumers…
– Ron Lane, President, Fairlane Financial Corp
