Back to the drawing board?

Moore says she senses that there's still something personal involved in the 151A battle, as was the case when former SEC Chairman Christopher Cox helped fast-track the legislation in the first place, citing the "Dateline" expose and a bad experience one of his own relatives had with an advisor.

"While serving as head of FINRA, formerly the NASD, current SEC Chairman Mary Schapiro was frequently quoted as saying that indexed annuities should be regulated as securities," Moore says. "She is definitely not a fan of these products. Furthermore, she has not made it any secret that she wishes to regulate numerous non-securities products under the SEC's purview."

Whatever the case, Moore says the fixed indexed annuity industry has its own options: You can sit around and wait for January 12, 2011, the magic date when 151A comes into effect and securitizes FIAs, or … join efforts such as last month's Washington D.C. fly-in, and continue to push legislators to support the Meeks-Price bill and its matching Senate bill, both calling for the nullification of 151A.

Others, however, contend that the Court of Appeals decision helps demonstrate the rushed and not-so-invisible, late-Bush Administration politicking that led to 151A being fast-tracked into existence in the first place. They see 151A as a lone last legislative stand for the SEC–which was about to receive incendiary criticism for its legendary mismanagement of both the flailing economy and the Madoff case.
Longtime industry insider and former Allianz chair Bob MacDonald, blogging on the subject, says he believes that the Court's decision will help spell the end to the 151A mess.

"Having consistently argued that 151A is both illogical and legal, I believe this Court of Appeals ruling effectively kills the 151A regulation," he wrote. "The SEC–with lots of bigger issues to deal with now, including its own survival–will not want to expend the time or energy to reopen the battle over the ruling. Every agent who has ever sold an equity fixed indexed annuity owes a debt of gratitude and thanks to the management of American Equity Insurance, for showing the courage to support the agents by standing up to the media and the SEC by filing the lawsuit."

Or are there bigger issues?

The Court of Appeals decision comes, as we have all seen, in the midst of a larger Obama Administration thrust to bring more and more of the financial world under federal scrutiny. Other legislation has since been introduced by Reps. Melissa Bean (D-Ill.) Ed Royce (R-Cal.) and to create a centralized federal insurance regulator. And as an example of the sentiment involved, Royce, clearly irritated by the spectacular economic troubles in his home state, said "… leaving the business of insurance regulation solely to the various state insurance commissioners, while the federal government provides taxpayer-funded assistance, is simply irresponsible."

Brian Atchinson, president and CEO of the Insurance Marketplace Standards Association, says that while 151A may appear to be on marginally shaky ground, read between the lines and you'll see that the SEC still retains a position of political prestige when it comes to a push towards increased federal oversight.
"With respect to responsibility and jurisdiction for supervising and regulating annuities, it's obvious that there's an initiative out there to get the federal legislation passed," he says. "So long as that district court decision holds–and it will probably be appealed–you're starting to see some of the market migrate to conformity with those expectations."

Atchinson says he actually sees the Court's decision as validation for those in the securities end of the dispute.

"The fact that the federal district court in this case affirmed that the SEC has jurisdiction over these annuities is indeed a game-changer," he adds. "We've already seen many in the industry readying themselves; many broker-dealers have already been subjecting all annuity sales to the protocols and practices which apply to those registered products. It certainly seems like the migration to a more centralized federal system may slowly evolve, unless there's some contrary federal legislation."