Rule 151A is going away, and the insurance industry is celebrating.
Old Mutual U.S. Life was among those who hailed Monday's decision by the U.S. Court of Appeals for the D.C. Circuit to vacate Securities and Exchange Commission Rule 151A.
Old Mutual U.S. Life, one of the petitioners in a high-profile lawsuit challenging Rule 151A, brought the request for rehearing that led to the court decision to vacate the rule. Eric Marhoun, senior vice president and general counsel, lauded the court's decision, saying, "we are very pleased by the court's action because it wipes the slate clean and clarifies that Rule 151A is null and void."
Rule 151A is the SEC's controversial regulation that seeks to reclassify fixed indexed annuities as securities and place them under SEC jurisdiction. The rule was challenged in court last year by several companies, including Old Mutual, and the National Association of Insurance Commissioners.
The court handed down its initial decision last July which upheld the SEC's authority to classify fixed indexed annuities as securities but sent the rule back to the SEC for reconsideration because of procedural flaws in the adoption process. Old Mutual filed a rehearing petition asking the court to stay the rule two years after any new rule was reissued. But the Court went further and threw out the rule entirely.
"This was a nice bonus," said Old Mutual's outside counsel Phil Bartz of McKenna, Long & Aldridge, who filed the petition on behalf of Old Mutual. "We felt the court needed to do something to protect the agents and companies writing FIA products and so we conservatively asked for a two-year implementation period. But the court saw fit to vacate the rule which means the SEC must completely start over, and they can now rethink this rule and perhaps simply drop it – particularly given recent action in the Congressional Conference Committee with respect to the Financial Regulatory Reform Bill."
