Court Quashes Rule 151A

An effort by the Securities and Exchange Commission (SEC) to regulate annuities as securities was dealt a decisive blow as the U.S. Court of Appeals for the District of Columbia Circuit yesterday ordered the SEC to vacate its Rule 151A.

First proposed in June 2008, Rule 151A was finalized in January 2009 and elicited an immediate push back from the industry, including the National Association for Fixed Annuities and the National Association of Insurance Commissioners. A coalition of insurers, dubbed the Coalition for Indexed Products, filed a suit to block the rule the day it was published in the Federal Register.

The court’s order comes after its ruling last year that questioned the SEC’s premise that it was better suited to regulate annuities than state insurance commissioners. “The SEC’s failure to analyze the efficiency of the existing state law regime renders arbitrary and capricious the SEC’s judgment that applying federal securities law would increase efficiency,” the three-judge panel stated.