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Federal Appeals Court Orders SEC To Reconsider Rule 151A Addressing Fixed Indexed Annuities.

Publication: Mondaq Business Briefing
Publication Date: 27-JUL-09 		Format: Online
Delivery: Immediate Online Access
Full Article Title: Federal Appeals Court Orders SEC To Reconsider Rule 151A Addressing Fixed Indexed Annuities.(American Equity Investment Life Insurance Co. into fixed indexed annuities cases)

Article Excerpt
On July 21, 2009 the United States Court of Appeals for the District of Columbia ordered the Securities and Exchange Commission ("SEC") to reconsider Rule 151A, a rule classifying indexed annuities as securities and subjecting their offer and sale to the federal securities laws. The Court held in American Equity Investment Life Insurance Company, et al. v. Securities and Exchange Commission1, that while indexed annuities can reasonably be considered securities under Rule 151A, the SEC "failed to properly consider the effect of the rule upon efficiency, competition and capital formation." Id. at 3.

Background The Securities Act of 1933 (the "Act") defines the term "security" to include any "investment contract." 15 U.S.C s. 77b(a)(1). Section 3(a)(8) of the Act provides a definitional exclusion for any insurance, endowment or annuity contract or optional annuity contract issued by companies supervised by state agencies. 15 U.S.C. s. 77c(a)(8).

In 1986, due to the mass marketing of new financial products, the SEC adopted Rule 151 which creates a "safe harbor" for certain annuity contracts by specifying conditions under which a contract is deemed to fall within...

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