Chicago — The U.S. Securities and Exchange Commission (SEC) today voted to extend its regulatory power by grabbing control of indexed annuities.
By a vote of 4-1, the SEC adopted Rule 151A, which reclassifies indexed annuities as securities. Now under SEC jurisdiction, the amendment will define terms related to annuity contracts under the Securities Act of 1933, and periodic reporting requirements under the Securities Exchange Act of 1934.
The rule was passed virtually unchanged from the initial proposal despite 4,800 comments. One of the major changes, however, extends the grace period from one to two years, meaning the rule would not go into effect until Jan. 12, 2011. Staff members said they also limited the rule to indexed annuities to not include "traditional fixed annuities."
First proposed in June, Rule 151A elicited enough controversy that a public comment period, which was due to close in September, was extended. Critics of the rule, including the Milwaukee-based National Association for Fixed Annuities (NAFA), contend that annuities are sufficiently regulated by the state insurance offices. Opponents say the rule will destroy the distribution network, costing thousands of jobs and, potentially, billions of dollars.
Sources: InsuranceNewsNet Inc., INN archives
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