A long-running battle between US insurance regulators and the
Securities and Exchange Commission (SEC) over regulatory control of
the indexed annuity market has ended in victory for insurance
regulators. Victory came thanks to President Barack Obama’s signing
into law of the Dodd-Frank Wall
Street Reform and Consumer Protection Act on 21 July.
Under the act, indexed annuities
will continue to be regulated as fixed insurance products
permanently, explained Sheryl Moore, president of Advantage Group
Associates, a fixed and indexed annuity research firm.
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Since their introduction by the US
life insurance industry in February 1995, indexed annuities had
been the subject of a regulatory conundrum: because their
performance is linked to equity indexes should they be treated as
an insurance product or as a security that should be regulated by
the SEC?
The first salvo in the battle for
regulatory control of index indexed annuity products was fired by
the National Association of Securities Dealers – now the Financial
Industry Regulatory Authority (FINRA) – which asserted that they
should be treated as securities and be regulated by the SEC.
Moore said that there then followed
a complex chain of events in the battle for control of regulation
of indexed annuities:
- 25 June 2008: The
SEC proposed Rule 151A, suggesting that indexed annuities be
regulated as securities, and opened their first comment period for
the rule, - 10 September
2008: The SEC closes the initial comment period for Rule
151A. - 10 October 2008:
The SEC reopens the comment period for Rule 151A due to an outcry
from the insurance industry, regulators, and legislators. - 10 November 2008:
The SEC closes the second and final comment period for Rule 151A
after receiving 4,448 comments on the rule, 80.44% of which opposed
the rule. - 17 December 2008:
The SEC adopts Rule 151A with minor modifications in a four to one
vote, with an effective implementation date of 12 January
2011. - 16 January 2009:
A coalition of insurance companies and marketing organisations file
suit against the SEC for Rule 151A. - 20 January 20,
2009: Christopher Cox resigns as chairman of the SEC. - 27 January 2009:
Mary Shapiro, former head of FINRA, is appointed SEC chairman. - 20 March 2009:
House Bill 2733, the Indexed Annuities and Insurance Products
Classification Act of 2009, introduced to Congress to reverse
Rule 151A. - 26 June 2009: A
matching Senate Bill introduced. - 21 July 2009:
District of Columbia US Court of Appeals says SEC failed to
rigorously analyse the impact of Rule 151A and tells the SEC that
they need to prove Rule 151A would improve competition, capital
formation, and efficiency. - 9 December 2009:
The SEC agrees to a two-year stay of Rule 151A. - 5 February 2010:
Insurer Old Mutual files a brief, requesting that the District of
Columbia US Court of Appeals vacate Rule 151A. - 23 June 2010:
Senate conferees approve an amendment to the Dodd-Frank Wall
Street Reform and Consumer Protection Act which would exempt
indexed annuities from SEC regulation. - 12 July 2010: The
District of Columbia US Court of Appeals vacates Rule 151A. - 16 July 2010: The
Senate votes to pass the Dodd-Frank Wall Street Reform and
Consumer Protection Act. - 21 July 2010: President Obama signs the
Dodd-Frank Wall Street Reform and Consumer Protection
Act.
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