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Court
Ruling on Indexed Annuity Regs |
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A federal appeals court yesterday upheld (click
here for decision) the SEC's authority
to regulate indexed annuities. However, the court remanded the SEC to
reexamine its regulation (Rule 151A) and either show the court that it
has properly taken into account the impact that Rule 151A would have on
competition, efficiency and capital formation or justify to the court
why this analysis is not required. On the authority of the SEC to regulate indexed annuities, the court ruled that given ambiguous statutory language, the SEC's interpretation is entitled to deference. The court held that the SEC did not need to show that investors could lose money on indexed annuities, but that variable returns were sufficient to constitute investment risk. The impact and reaction of the court's ruling is not yet clear. Both sides can appeal the decision. The SEC could follow the court's ruling and either show adequate consideration of Rule 151A on competition, efficiency and capital formation or show why the SEC is not required to conduct this analysis. Rule 151A, described in our Washington Report 09-06 (click here), is not slated to take effect until January 12, 2011. Meanwhile, Congress continues to consider legislation to exempt indexed annuities from SEC regulation. We will keep you informed of further developments.
Regards,
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