Bill Could Kill SEC's New Index-Linked Annuity Registration Rule
Issuer reactions to the rule have seemed positive.
A member of Congress wants to cancel the U.S. Securities and Exchange Commission’s new registration system for registered index-linked annuities and annuities with market-value-adjustment features.
Rep. Gary Palmer, R-Ala., has introduced House Joint Resolution 209, a measure that would express congressional disapproval of the SEC’s new RILA and MVA registration regulations. Congressional adoption of the resolution would overturn the regulations.
Palmer did not make a statement or put out a press release discussing the bill, and members of his office could not immediately be reached for comment.
What it means: Annuity issuers have been lobbying the SEC for years to create a new registration process for RILA contracts, to eliminate the need for issuers to use the same kind of complicated process used to register a publicly traded company.
The SEC finally voted to adopt final registration regulations in June, in response to a requirement included in an appropriations bill passed in 2022.
It could be that some of the issuers or others are unhappy with the results of that effort.
RILAs and MVAs: RILAs tie growth in contract value to the performance of one or more investment indexes. Because the products are registered with the SEC, they can expose the holder to loss of principal.
Because the performance is tied to investment indexes, the issuer can manage the contract’s investment risk by buying index options.
The structure also gives the issuer an easy way to adjust the amount of contract value protection provided.
Industry reactions: The Insured Retirement Institute welcomed the new registration regulation when it came out, predicting it could increase competition in the RILA market.
Life and annuity lawyers at Carlton Fields expressed some concerns about details, such as limits on some issuers’ ability to use simple “free writing prospectus materials,” in a recent analysis, but they called the new regulations “a win-win for investors and the industry.”
The U.S. Capitol. Credit: Christian Hinkle/Shutterstock