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US Financial Reform Amendment Blocks SEC Annuities Rule
Copyright 2010 A.M. Best Company, Inc.All Rights Reserved BestWire
June 24, 2010 Thursday 04:46 PM EST
439 words
US Financial Reform Amendment Blocks SEC Annuities Rule
Sean P Carr
WASHINGTON
The U.S. Securities and Exchange Commission would be barred from regulating equity-indexed annuities as securities under an amendment newly included in the financial regulatory reform bill now in its final stages in Congress. The amendment to H.R. 4173, The Wall Street Reform and Consumer Protection Act, adopted by conference committee members is a victory for annuities issuers who had sued to block the SEC action. The conference committee included House members who sponsored legislation to block the SEC from regulating the products, as well as Sen. Thomas Harkin, D-Iowa, who previously sought an amendment to the Senate bill that would have given states and territories sole authority to regulate indexed annuities (BestWire, May 17, 2010).Adoption of the amendment caught close observers of the annuity-regulation controversy by surprise. "I thought for all intents and purposes this thing was dead as a doorknob," said Steven Schwartz, senior vice president of equity research for Raymond James & Associates. Schwartz welcomed the amendment, adding, "I do not think that indexed annuities are securities."In December 2008, the commission voted to reclassify the annuities as securities, not insurance products. Under SEC Rule 151A, indexed annuities would be treated as securities if amounts payable by the insurer are more likely than not to surpass amounts guaranteed under the contract. Effective Jan. 12, 2011, insurance carriers would be required to file their products with the SEC and offer them via a prospectus (BestWire, Dec. 17, 2009).In July 2009, the U.S. Court of Appeals for the District of Columbia Circuit ordered the SEC to reconsider its ruling, saying it "failed to properly consider the effect of the rule upon efficiency, competition, and capital formation." The finding determined the SEC hadn't followed its proper rules in assessing every aspect of its decision. But the court didn't find that the SEC had made a mistake in deciding that indexed annuities should fall under the Securities Act of 1933 (BestWire, July 21, 2009).Lawmakers concurred with plaintiffs that the SEC action was an overreach, said Jim Poolman, spokesman for the Coalition for Indexed Products, a group of insurance companies that sell indexed annuities. The case remains before the appellate body, but the amendment will dramatically change the case if the full bill becomes law as expected in the coming days, he said."State insurance regulators have done a good job in regulating the product and now they'll continue to be able to do their jobs," Poolman said.(By Sean P. Carr, Washington Correspondent: [email protected])
June 25, 2010
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